Prospectus Supplement
(To Prospectus dated August 3, 2000)
$691,731,000 [LOGO]
ANRC AUTO OWNER TRUST 2000-A
AUTONATION RECEIVABLES CORPORATION, Seller
AUTONATION FINANCIAL SERVICES CORP., Servicer
THESE SECURITIES ARE HIGHLY STRUCTURED. BEFORE YOU PURCHASE THESE
SECURITIES, BE SURE YOU UNDERSTAND THE STRUCTURE AND THE RISKS. SEE "RISK
FACTORS" BEGINNING ON PAGE S-6 IN THIS PROSPECTUS SUPPLEMENT.
The notes are obligations of ANRC Auto Owner Trust 2000-A and are backed
only by the assets of the trust. The notes are not obligations of
AutoNation Receivables Corporation, AutoNation Financial Services Corp.,
any of their affiliates or any governmental agency.
This prospectus supplement may be used to offer and sell the notes only if
accompanied by the prospectus.
THE NOTES:
o The trust is offering four classes of notes.
o The notes are backed by a pledge of the trust's assets. The trust's
assets include fixed rate motor vehicle retail installment sales
contracts secured by new and used automobiles and light-duty trucks.
o The trust will pay interest and principal on the notes on the 15th day
of each month or the first business day after the 15th. The first
distribution date is September 15, 2000.
o MBIA Insurance Corporation will issue an insurance policy that
unconditionally and irrevocably guarantees payments of interest on and
principal of the notes to the extent described in this prospectus
supplement.
[LOGO]
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PRINCIPAL INTEREST FINAL SCHEDULED PRICE TO UNDERWRITING PROCEEDS TO
AMOUNT RATE DISTRIBUTION DATE PUBLIC(1) DISCOUNTS SELLER(2)
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Class A-1 Notes.. $167,692,000 6.72462% August 15, 2001 100.000001% 0.1250% 99.875001%
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Class A-2 Notes.. $227,084,000 7.00% March 17, 2003 99.992096% 0.2000% 99.792096%
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Class A-3 Notes.. $196,340,000 7.06% May 17, 2004 99.982825% 0.2200% 99.762825%
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Class A-4 Notes.. $100,615,000 7.15% February 15, 2007 99.987990% 0.2500% 99.737990%
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Total............ $691,731,000 $691,6$7,248 $ 1,347,269 $690,319,979
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(1) Plus accrued interest, if any, from August 10, 2000.
(2) Before deducting expenses estimated to be $500,000.
The notes are offered subject to availability.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED ON THE
ADEQUACY OR ACCURACY OF THE DISCLOSURES IN THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
FIRST UNION SECURITIES, INC.
BANC OF AMERICA SECURITIES LLC
CHASE SECURITIES INC.
CREDIT SUISSE FIRST BOSTON
The date of this Prospectus Supplement is August 3, 2000.
TABLE OF CONTENTS
WHERE TO FIND INFORMATION IN THESE
DOCUMENTS..................................................................S-2
SUMMARY....................................................................S-3
RISK FACTORS...............................................................S-6
Lack of performance data due to
limited operating history of
AutoNation Financial Services.....................................S-6
Absence of secondary market for the
notes could limit your ability to
resell ...........................................................S-6
Limited assets of the trust could
result in losses on the notes.....................................S-6
Potential prepayment of the notes
may require reinvestment of principal
at a lower rate of return.........................................S-6
Interests of other persons in contracts
and vehicles could reduce the
funds available to make
payments on the notes.............................................S-7
Bankruptcy of AutoNation Financial Services could result in losses or
delays in payments on the notes due to the power of bankruptcy
courts to provide equitable relief................................S-7
Bankruptcy of AutoNation Financial Services could result in losses or
delays in payments on the notes if the bankruptcy court
follows an adverse legal decision.................................S-8
Geographic concentration of contracts
in Florida, Texas and California could
result in losses on the notes.....................................S-8
Noteholders may not declare events of
default under the indenture or decide
the consequences of events of
default...........................................................S-8
Events of default under the indenture
could result in losses or
acceleration of payments on the
notes.............................................................S-8
Class A-2 notes, class A-3 notes and
class A-4 notes bear additional
credit risk.......................................................S-9
DESCRIPTION OF THE TRUST..................................................S-10
ANRC Auto Owner Trust 2000-A.........................................S-10
Capitalization of the Trust..........................................S-10
The Owner Trustee....................................................S-10
Trust Property.......................................................S-11
AUTONATION FINANCIAL SERVICES' PORTFOLIO OF MOTOR
VEHICLE CONTRACTS....................................................S-11
Origination of Motor Vehicle
Contracts........................................................S-11
Delinquency and Loss Experience......................................S-12
DESCRIPTION OF THE CONTRACTS..............................................S-13
PREPAYMENT AND YIELD CONSIDERATIONS.......................................S-17
USE OF PROCEEDS...........................................................S-21
DESCRIPTION OF THE NOTES..................................................S-21
Issuance and Registration of the Notes...............................S-21
Interest Payments....................................................S-21
Principal Payments...................................................S-22
Optional Redemption..................................................S-22
The Indenture Trustee................................................S-22
Events of Default under the Indenture................................S-22
Amendment Under the Indenture........................................S-23
DESCRIPTION OF THE TRANSFER AND SERVICING
AGREEMENTS...........................................................S-24
Sale and Assignment of the
Contracts............................................................S-24
The Accounts.........................................................S-24
Payments on Contracts................................................S-25
Distributions........................................................S-25
Early Repayment......................................................S-26
Payment Priorities of the Notes......................................S-27
The Spread Account...................................................S-27
Withdrawals from the Spread Account..................................S-27
Overcollateralization................................................S-28
Statements to Noteholders............................................S-28
Reports to Noteholders...............................................S-28
Servicing Fee........................................................S-28
Default by the Servicer; Rights upon
Default by the Servicer..........................................S-29
Amendment............................................................S-29
Termination..........................................................S-30
Optional Purchase....................................................S-30
Payment in Full of Notes.............................................S-30
Description of the Administration
Agreement........................................................S-30
DESCRIPTION OF THE INSURANCE POLICY.......................................S-30
DESCRIPTION OF THE INSURER................................................S-32
The Insurer..........................................................S-32
Financial Information about the Insurer..............................S-32
Where You Can Obtain Additional
Information about the Insurer....................................S-32
Financial Strength Ratings of the
Insurer..........................................................S-33
LEGAL INVESTMENT.........................................................S-33
MATERIAL FEDERAL INCOME TAX
CONSEQUENCES..............................................................S-33
ERISA CONSIDERATIONS......................................................S-33
UNDERWRITING..............................................................S-35
LEGAL MATTERS.............................................................S-36
EXPERTS...................................................................S-36
GLOSSARY..................................................................S-37
EXHIBIT A..................................................................A-1
WHERE TO FIND INFORMATION IN THESE DOCUMENTS
The accompanying prospectus provides general information about ANRC Auto
Owner Trust 2000-A, including terms and conditions that are generally
applicable to the securities issued by the trust. The specific terms of
your notes are described in this prospectus supplement.
This prospectus supplement begins with the following two sections, which
describe your notes and the trust:
o Summary provides a brief description of your notes, including
important amounts, dates and other terms and features; and
o Risk Factors describes risks that apply to your notes.
As you read through this prospectus supplement, cross-references will
direct you to more detailed descriptions in the accompanying prospectus and
elsewhere in this prospectus supplement. You can also directly reference
key topics by looking at the table of contents in this prospectus
supplement and the accompanying prospectus.
You can find a glossary where capitalized terms used in this prospectus
supplement are defined beginning on page S-37 in this prospectus
supplement.
IF THE DESCRIPTIONS OF YOUR NOTES VARY BETWEEN THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THIS
PROSPECTUS SUPPLEMENT.
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TO UNDERSTAND THE STRUCTURE OF THESE SECURITIES, YOU MUST READ
CAREFULLY THE ACCOMPANYING PROSPECTUS AND THIS PROSPECTUS SUPPLEMENT
IN THEIR ENTIRETY.
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SUMMARY
This summary contains a brief description of the notes. You will find a
detailed description of the terms of the offering of the notes following
this summary.
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Trust: ANRC Auto Owner Trust 2000-A
Seller of the Contracts: AutoNation Receivables Corporation
Seller's Address: 110 South East 6th Street, Fort Lauderdale, Florida 33301
Seller's Telephone Number: (954) 769-7000
Servicer of the Contracts: AutoNation Financial Services Corp.
Subservicer of the Contracts: World Omni Financial Corp.
Owner Trustee: The Bank of New York (Delaware)
Indenture Trustee: The Chase Manhattan Bank
Insurer: MBIA Insurance Corporation
Clearance and Settlement: The Depository Trust Company
Assets of the Trust: The trust's assets include:
o fixed rate motor vehicle retail installment sales contracts
secured by new and used automobiles and light-duty trucks;
o collections on the contracts;
o liens on the financed vehicles and the rights to receive
proceeds from claims on insurance policies;
o funds in the accounts of the trust;
o any enhancements issued in favor of the trust; and
o proceeds of these assets.
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The Terms of the Notes:
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CLASS A-1 NOTES CLASS A-2 NOTES CLASS A-3 NOTES CLASS A-4 NOTES
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Principal Amount: $167,692,000 $227,084,000 $196,340,000 $100,615,000
Interest Rate: 6.72462% p.a. 7.00% p.a. 7.06% p.a. 7.15% p.a.
Interest Accrual
Method: actual / 360 30 / 360 30 / 360 30 / 360
Cut-Off Date: June 30, 2000 June 30, 2000 June 30, 2000 June 30, 2000
Distribution Dates: monthly (15th) monthly (15th) monthly (15th) monthly (15th)
First Distribution Date: September 15, 2000 September 15, 2000 September 15, 2000 September 15, 2000
Final Scheduled
Distribution Date: August 15, 2001 March 17, 2003 May 17, 2004 February 15, 2007
Anticipated Ratings: P-1/A-1+ Aaa/AAA Aaa/AAA Aaa/AAA
(Moody's/S&P)*
Credit Enhancement: insurance policy, insurance policy, insurance policy, insurance policy,
spread account and spread account and spread account and spread account and
over- over- over- over-
collateralization collateralization collateralization collateralization
CUSIP Number: 00181QAE3 00181QAF0 00181QAG8 00181QAH6
ISIN Number: US00181QAE35 US00181QAF00 US00181QAG82 US00181QAH65
</TABLE>
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* It is a condition to issuance that both of these ratings be obtained.
However, a rating agency in its discretion may lower or withdraw its
rating in the future.
ANRC AUTO OWNER TRUST 2000-A
ANRC Auto Owner Trust 2000-A, a Delaware business trust, is offering the
notes to the public. The trust will use the proceeds from the issuance and
sale of the notes to purchase the contracts and deposit funds into the
spread account. The trust will rely upon collections on the contracts and
the funds on deposit in various accounts to make payments on the notes.
THE NOTES
On the closing date the trust will issue four classes of notes. The trust
will use collections on the underlying trust assets to make interest and
principal payments on the notes and to pay a portion of the fees and
expenses owed by the trust, including AutoNation Financial Services Corp.'s
fees as servicer. After the payment of specified fees and expenses, the
trust will allocate collections first to make interest payments on the
notes and then to make payments of principal. In no case will you receive
more than the principal and interest owed to you under the terms described
in this prospectus supplement and the accompanying prospectus.
THE CONTRACTS
The trust's main source of funds for making payments on the notes will be
collections on the contracts. The contracts are retail installment sales
contracts secured by new and used automobiles and light-duty trucks. Each
contract in the trust is a fully-amortizing fixed rate contract with
scheduled level monthly payments of principal and interest.
SEQUENTIAL PAY FEATURE
The notes feature "sequential pay" classes. On each distribution date, the
trust will allocate principal payments on the notes as follows:
o first, the class A-1 notes will receive principal until they are
paid off;
o once the class A-1 notes are paid off, the class A-2 notes will
begin to receive principal until they are paid off;
o once the class A-2 notes are paid off, the class A-3 notes will
begin to receive principal until they are paid off; and
o once the class A-3 notes are paid off, the class A-4 notes will
begin to receive principal until they are paid off. In addition,
the outstanding principal amount of any class, to the extent not
previously paid, will be due and payable on the applicable final
scheduled distribution date for that class.
CREDIT ENHANCEMENT
Credit enhancement is provided to the notes by the following:
o an insurance policy issued by MBIA Insurance Corporation, a
financial guaranty provider;
o the spread account; and
o overcollateralization.
These forms of credit enhancement are intended to protect you from net
losses and shortfalls in cash flow.
Insurance Policy. On the closing date, the insurer will issue an insurance
policy that unconditionally guarantees the timely payment of interest due
on the notes on each distribution date and the payment of principal of the
notes by the related final scheduled distribution date of each class of
notes.
Spread Account. The spread account serves as a reserve fund upon which the
trust may draw to enhance the likelihood of receipt by noteholders of
amounts due them and to decrease the likelihood of losses. On each
distribution date, the trust will use funds in the spread account to pay
the following amounts if collections on the contracts are insufficient to
pay those amounts:
o the servicer's fee and the fees of the trustees;
o the insurance premium to the insurer;
o interest and principal on the notes; and
o reimbursement for any draws under the insurance policy and other
amounts owed to the insurer.
Overcollateralization. The initial balance of the contracts in the trust
will be $698,718,463.75, which will exceed the initial principal amount of
the notes by $6,987,463.75, or approximately 1.0%.
If the cash flow and any credit enhancement do not cover all net losses,
your payments of interest and principal will be reduced and you may suffer
a loss of principal.
SCHEDULED PRINCIPAL PAYMENTS AND POTENTIAL EARLY
PAYMENTS
The trust expects to pay the entire principal amount of the notes no later
than the final scheduled distribution dates listed below:
Class A-1 August 15, 2001
Class A-2 March 17, 2003
Class A-3 May 17, 2004
Class A-4 February 15, 2007
However, the trust believes that the outstanding principal amount of each
class of notes will likely be paid in full earlier, and could be paid
significantly earlier than the applicable final scheduled distribution
date. The likelihood of early repayment depends on a variety of factors,
including full repayments of contracts in advance by the related obligors.
OPTIONAL REDEMPTION
The servicer can elect to purchase all of the contracts at any time if
their aggregate principal balance is 10% or less of their aggregate
principal balance on the date they were sold to the trust. If the servicer
exercises this option, it will deposit the requisite funds and cause the
indenture trustee to apply those funds to redeem the notes and pay all
accrued and unpaid interest and principal on the notes plus other amounts
owed to the servicer, the trustees and the insurer.
TAX STATUS
Weil, Gotshal & Manges LLP is of the opinion that, although there is no
specific authority regarding the characterization for federal income tax
purposes of securities having terms similar to the notes or an entity
similar to the trust, assuming compliance with the owner trust agreement
and the other transaction documents, on the date of issuance of the notes,
for U.S. federal income tax purposes:
o the notes will be characterized as debt; and
o the trust will not be an association or a publicly traded
partnership taxable as a corporation.
If you purchase the notes, you will agree to treat them as debt for tax
purposes.
ERISA CONSIDERATIONS
The notes are generally eligible for purchase by persons investing assets
of employee benefit plans that are subject to the Employee Retirement
Income Security Act of 1974. The administrators of employee benefit plans
should review the matters discussed under "ERISA Considerations" and also
should consult with their legal advisors before purchasing the notes.
ELIGIBILITY OF CLASS A-1 NOTES FOR PURCHASE BY MONEY
MARKET FUNDS
The class A-1 notes are structured to be eligible for purchase by money
market funds under Rule 2a-7 under the Investment Company Act of 1940.
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase the notes.
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LACK OF PERFORMANCE DATA DUE TO AutoNation Financial Services began its
LIMITED OPERATING HISTORY OF operations in February 1997 and has limited
AUTONATION FINANCIAL SERVICES performance data for the motor vehicle retail
installment sales contracts it originates. As the
portfolio of contracts originated by
AutoNation Financial Services matures,
delinquency percentages and loan
losses may differ from prior
performance. There is no assurance
that the performance of the contracts
in the trust will be similar to the
limited historical performance of the
portfolio as a whole.
ABSENCE OF SECONDARY MARKET FOR THE You may be unable to resell your notes
NOTES COULD LIMIT YOUR ABILITY TO due to the absence of a secondary
RESELL market for the notes. The underwriters may
assist in resales of the notes but are
not required to do so. A secondary
market for the notes may not develop.
If a secondary market does develop, it
may not continue or it may not be
sufficiently liquid to allow you to
resell your notes.
LIMITED ASSETS OF THE TRUST COULD You may suffer a loss on your notes if
RESULT IN LOSSES ON THE NOTES the assets of the trust are insufficient to
pay the principal amount of the notes in
full and the insurer defaults in its
obligations under the insurance
policy. The only source of funds for
payments on the notes will be the
assets of the trust and the insurance
policy. The assets of the trust are
limited to the contracts, the funds on
deposit in the trust's bank accounts
and rights under the trust's
agreements. You must rely for payment
of the notes solely upon collections
on the contracts, funds on deposit in
the trust's bank accounts and payments
made under the insurance policy.
Accordingly, you may not rely upon any
assets of AutoNation Financial
Services, the seller, the owner
trustee, the indenture trustee or any
of their respective affiliates for
payment of the notes.
POTENTIAL PREPAYMENT OF THE NOTES Possible prepayments of contracts by the
MAY REQUIRE REINVESTMENT OF PRINCIPAL related obligors, the constant level
AT A LOWER RATE OF RETURN of overcollateralization and possible purchases
of contracts by the seller or AutoNation Financial
Services will result in the
acceleration of principal payments on
your notes. You may not be able to
reinvest the principal repaid to you
earlier than expected at a rate of
return that is equal to or greater
than the rate of return on your notes.
Although AutoNation Financial Services
maintains historical records on the
rate of prepayment on its contracts,
those records are limited due to the
relatively short operating history of
AutoNation Financial Services. The
obligors on the contracts may prepay
the contracts voluntarily at any time.
In addition, the contracts are
required to be prepaid upon the sale,
insured loss or other disposition of
the related vehicle.
If AutoNation Financial Services
breaches any of its representations
and warranties regarding any
contracts, AutoNation Financial
Services will be required to
repurchase those contracts from the
seller, and the seller will be
required to repurchase those contracts
from the trust. AutoNation Financial
Services will also be required to
purchase contracts from the trust if
it breaches its servicing obligations
relating to those contracts. In
addition, AutoNation Financial
Services will be entitled to purchase
all of the remaining contracts from
the trust once the aggregate principal
balance of the contracts is 10% or
less of their aggregate principal
balance on the date they were sold to
the trust.
INTERESTS OF OTHER PERSONS IN CONTRACTS Another person could acquire an interest in a contract
AND VEHICLES COULD REDUCE THE FUNDS that is superior to the trust's interest in that
TO MAKE PAYMENTS ON THE NOTES contract. This could occur because AutoNation Financial
Services, prior to a default by the servicer, will not be
required to mark the physical contracts as belonging to the
trust. If another person acquires an interest in a contract
that is superior to the trust's interest, the collections on
that contract will not be available to make payments on the
notes. In addition, another person could acquire an interest
in a vehicle financed by a contract that is superior to the
trust's interest in the vehicle. This could occur because
AutoNation Financial Services will not be required to amend
the related certificate of title to identify the trust as
the new secured party. If another person acquires an
interest in a vehicle that is superior to the trust's
interest, the proceeds from the sale of that vehicle will
not be available to make payments on the notes.
BANKRUPTCY OF AUTONATION FINANCIAL If AutoNation Financial Services enters a bankruptcy
SERVICES COULD RESULT IN LOSSES OR proceeding and the insurer defaults in its obligations under
DELAYS PAYMENTS ON THE NOTES DUE the insurance policy, you could experience losses or delays
TO THE POWER OF BANKRUPTCY in the payments on your notes due to the power of the court
COURTS TO PROVIDE EQUITABLE RELIEF in a bankruptcy proceeding to provide equitable relief.
AutoNation Financial Services will sell the contracts to the
seller, and the seller will sell the contracts to the trust.
AutoNation Financial Services and the seller will treat
these transactions as absolute transfers. However, if
AutoNation Financial Services enters a bankruptcy
proceeding, the court has the power to conclude that the
sale of the contracts by AutoNation Financial Services to
the seller was not a "true sale" and that AutoNation
Financial Services still owns the contracts. The court also
has the power to conclude that AutoNation Financial Services
and the seller should be consolidated for bankruptcy
purposes. If the court were to reach any of these
conclusions, you could experience losses or delays in
payments on your notes because:
o the indenture trustee would not be able to
exercise remedies against AutoNation Financial
Services on your behalf without permission from
the court;
o the court might require the indenture trustee to
accept property in exchange for the contracts that
is of less value than the contracts;
o the court might prevent the indenture trustee or
the noteholders from taking some actions such as
selling the contracts or appointing a successor
servicer;
o the court might sell the contracts and pay off the
notes before their maturity;
o tax or government liens on AutoNation Financial
Services' property that arose before the transfer
of the contracts to the trust would be paid from
the collections on the contracts before the
collections were used to make payments on your
notes; and
o the indenture trustee might not have a perfected
security interest in the vehicles securing the
contracts or cash collections held by AutoNation
Financial Services at the time a bankruptcy
proceeding begins.
The seller has taken steps in structuring the trust to
minimize the risk that a court would conclude that the sale
of the contracts to the seller was not a true sale or that
AutoNation Financial Services and the seller should be
consolidated for bankruptcy purposes.
BANKRUPTCY OF AUTONATION FINANCIAL If AutoNation Financial Services enters a bankruptcy
SERVICES COULD RESULT IN LOSSES OR proceeding and the insurer defaults in its obligations under
DELAYS PAYMENTS ON THE NOTES IF THE the insurance policy, you could experience losses or delays
BANKRUPTCY COURT FOLLOWS in the payments on your notes if the court in a bankruptcy
AN ADVERSE LEGAL DECISION proceeding follows the reasoning of an adverse legal
decision. In a case decided by the U.S. Court of
Appeals for the Tenth Circuit in 1993, the court
concluded that accounts transferred by a seller to a
buyer should be included in the bankruptcy estate of
the seller even if the transfer was a true sale.
Counsel to the seller has advised that the facts of
that case are distinguishable and that the reasoning of
that court appears to be inconsistent with established
precedent and the Uniform Commercial Code. However, if
AutoNation Financial Services enters a bankruptcy
proceeding and the court in the bankruptcy proceeding
applies the reasoning of the court in that case and the
insurer defaults in its obligations under the insurance
policy, you could experience losses or delays in the
payments on your notes.
GEOGRAPHIC CONCENTRATION OF CONTRACTS Economic conditions in the jurisdictions where the obligors
IN FLORIDA, TEXAS AND CALIFORNIA COULD under the contracts reside may affect the delinquency, loan
RESULT IN LOSSES ON THE NOTES loss and repossession experience of the trust relating to the
contracts. As of the Cut-Off Date, contracts related to
obligors with mailing addresses in Florida totaled
26.30% of the trust, contracts related to obligors with
mailing addresses in Texas totaled 17.58% of the trust
and contracts related to obligors with mailing
addresses in California totaled 16.48% of the trust.
Adverse economic conditions affecting Florida, Texas or
California could have a disproportionately significant
effect on the delinquency, loan loss and repossession
experience of the trust. Adverse economic conditions in
those jurisdictions could also have a negative impact
on the timing and amount of principal and interest
payments on the notes.
NOTEHOLDERS MAY NOT DECLARE EVENTS OF Noteholders may not declare events of default under the
DEFAULT UNDER THE INDENTURE OR DECIDE indenture or decide the consequences of events of default if
THE CONSEQUENCES OF EVENTS OF DEFAULT the insurer has not defaulted under the insurance policy.
Except in limited circumstances in which the insurer
defaults under the insurance policy or upon a
bankruptcy event of the insurer, only the insurer can
declare an event of default under the indenture. If the
insurer declares an event of default under the
indenture, the insurer will have the right to cause the
liquidation of the trust and the acceleration of the
notes. Following an event of default under the
indenture, the indenture trustee will continue to
submit claims under the insurance policy for any
shortfalls in the amount needed to make payments on the
notes. However, the insurer may instead elect to repay
all or any portion of the outstanding notes, plus any
accrued interest.
EVENTS OF DEFAULT UNDER THE INDENTURE If an event of default occurs under the indenture resulting in
COULD RESULT IN LOSSES OR ACCELERATION the acceleration of the notes, it may shorten the average term
PAYMENTS ON THE NOTES and date of final payment of the notes. You may not be able
to reinvest the principal repaid to you earlier than
expected at a rate of return that is equal to or
greater than the rate of return on your notes. In
addition, you may not be paid the principal amount of
your notes in full if the insurer defaults under the
insurance policy and the assets of the trust are
insufficient to pay the principal amount of all the
notes in full.
CLASS A-2 NOTES, CLASS A-3 NOTES AND The class A-2 notes, the class A-3 notes and the class A-4
NOTES BEAR ADDITIONAL CREDIT RISK notes bear more credit risk than the class A-1 notes. Principal
payments on the class A-2 notes will not begin until
all principal of the class A-1 notes has been repaid.
Similarly, principal payments on the class A-3 notes
will not begin until all principal of the class A-2
notes has been repaid. Additionally, principal payments
on the class A-4 notes will not begin until all
principal of the class A-3 notes has been repaid. If
the insurer defaults under the insurance policy after
one or more classes of notes have been fully or
partially repaid and before other classes of notes with
a higher numerical designation have been fully repaid,
subsequent losses on the contracts will have a
disproportionately greater effect on those classes of
notes with higher numerical designations.
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DESCRIPTION OF THE TRUST
Capitalized terms are defined in this prospectus supplement and, if not, in
the accompanying prospectus. Definitions are indicated by boldface type.
Both the accompanying prospectus and this prospectus supplement contain a
glossary where capitalized terms are defined.
ANRC AUTO OWNER TRUST 2000-A
ANRC Auto Owner Trust 2000-A is a business trust formed under the
laws of the state of Delaware pursuant to an amended and restated owner
trust agreement, dated as of August 10, 2000, between the owner trustee and
the seller.
The assets of the trust will include a pool of motor vehicle retail
installment sales contracts, all of which are secured by new and used
automobiles and light-duty trucks, acquired from the seller pursuant to a
sale and servicing agreement, dated as of August 10, 2000, among the trust,
the seller and the servicer. The trust has not and will not engage in any
business activity other than the following:
(1) acquiring, holding and managing the contracts and the other assets
of the trust and proceeds therefrom;
(2) issuing the following notes to noteholders:
o the ANRC Auto Owner Trust 2000-A, 6.72462% Class A-1
Asset-Backed Notes;
o the ANRC Auto Owner Trust 2000-A, 7.00% Class A-2
Asset-Backed Notes;
o the ANRC Auto Owner Trust 2000-A, 7.06% Class A-3
Asset-Backed Notes; and
o the ANRC Auto Owner Trust 2000-A, 7.15% Class A-4
Asset-Backed Notes;
(3) issuing certificates;
(4) making payments and distributions on the notes and the
certificates; and
(5) engaging in other activities that are necessary, suitable or
convenient to accomplish the foregoing or are incidental thereto or
connected therewith.
The trust's principal executive offices are located in Newark,
Delaware, in care of the owner trustee at the address listed below under
"-The Owner Trustee."
CAPITALIZATION OF THE TRUST
The trust will initially be capitalized with equity (exclusive of the
funds deposited in the spread account) equal to $6,987,463.75, which is the
difference between the Pool Balance as of the Cut-Off Date and the initial
aggregate principal amount of the notes. The residual interest in the trust
(including the right to receive distributions from the spread account) will
initially be held by the seller.
The following table illustrates the capitalization of the trust as of
the Cut-Off Date (assuming the issuance had taken place on the Cut-Off
Date):
Class A-1 Notes.........................$167,692,000.00
Class A-2 Notes..........................227,084,000.00
Class A-3 Notes..........................196,340,000.00
Class A-4 Notes..........................100,615,000.00
Equity................................... 6,987,463.75
--------------
Total.............................$698,718,463.75
==============
THE OWNER TRUSTEE
The Bank of New York (Delaware) will be the owner trustee. The owner
trustee is a Delaware banking corporation with principal offices located at
White Clay Center, Route 273, Newark, Delaware 19711.
The liability of the owner trustee in connection with the issuance
and sale of the notes is limited solely to the express obligations of the
owner trustee set forth in the owner trust agreement and the sale and
servicing agreement.
TRUST PROPERTY
The property of the trust will include the following:
(1) the contracts, all of which will have been purchased from the
seller and are secured by financed vehicles;
(2) all documents relating to the contracts, including all servicing
records in hard or electronic form;
(3) collections and all other amounts due under the contracts after
the Cut-Off Date;
(4) liens on the financed vehicles and the right to receive proceeds
from claims on any related insurance policies covering the financed
vehicles or the related obligors;
(5) all amounts on deposit in the collection account, the payment
account, the note distribution account and the spread account, including
the principal amount of all Eligible Investments credited to the collection
account and the spread account and any investment income thereon;
(6) the rights of the seller (but not its obligations) under the
receivables purchase agreement; and
(7) all proceeds of the foregoing.
Pursuant to an indenture, dated as of August 10, 2000, between the
trust and The Chase Manhattan Bank, as indenture trustee, the trust will
grant a security interest in the Trust Property in favor of the indenture
trustee on behalf of the noteholders and for the benefit of the insurer in
support of the obligations owing to the insurer under the insurance
agreement, dated as of August 10, 2000, among the insurer, the seller,
AutoNation Financial Services, the trust, the owner trustee and the
indenture trustee.
AUTONATION FINANCIAL SERVICES' PORTFOLIO OF MOTOR VEHICLE CONTRACTS
ORIGINATION OF MOTOR VEHICLE CONTRACTS
AutoNation Financial Services originates motor vehicle retail
installment sales contracts secured by new and used automobiles and
light-duty trucks in connection with providing financing for the purchase
of those vehicles. The motor vehicle contracts in AutoNation Financial
Services' serviced portfolio that will be conveyed to the trust, also known
as the receivables pool, were originated from application referrals
received from the following dealers: (1) franchised automotive dealerships;
(2) previously owned or licensed used vehicle megastores and (3) eight
third party franchised automotive dealerships. All of the contracts
included in the Trust Property have been sold to the seller by AutoNation
Financial Services from its serviced portfolio and then sold to the trust.
See "AutoNation Financial Services' Portfolio of Motor Vehicle Contracts -
Origination of Motor Vehicle Contracts" in the accompanying prospectus. The
percentages of its serviced portfolio which represent application referrals
from dealerships, used vehicle megastores and third party dealerships,
respectively, may change over time. However, because each application and
related obligor will be evaluated by AutoNation Financial Services based on
the same underwriting criteria, AutoNation Financial Services believes that
changes over time of the percentages of its serviced portfolio representing
application referrals from dealerships, used vehicle megastores and third
party dealerships should not have a material adverse effect on the overall
credit quality of the serviced portfolio.
As of June 30, 2000, the composition of AutoNation Financial
Services' serviced portfolio was as follows:
<TABLE>
<S> <C>
Aggregate principal balance of contracts.......... $1,760,480,851.51
Number of contracts............................... 139,045
Percentage of contracts secured by new vehicles... 39.79%(1)
Percentage of contracts secured by used vehicles.. 60.21%(1)
Weighted Average APR.............................. 11.43%
Average original amount financed.................. $15,635.63
Weighted average original term to maturity........ 59.57 months
Weighted average remaining term to maturity....... 47.33 months
Geographic concentrations (greater than 10%)...... Florida (27.45%), Texas (20.18%)
and California (15.61%)(1)
</TABLE>
(1) Percentage determined by principal amount of the contracts.
DELINQUENCY AND LOSS EXPERIENCE
AutoNation Financial Services considers a contract to be delinquent
if at any time $40 or more is past due thereunder. Efforts to collect
delinquent contract payments are made by AutoNation Financial Services'
collection department personnel, collection agencies and attorneys retained
by AutoNation Financial Services. For a description of AutoNation Financial
Services' collection practices and policies see "AutoNation Financial
Services' Portfolio of Motor Vehicle Contracts--Collection Procedures" in
the accompanying prospectus.
The following tables set forth the delinquency, loss and recovery
experience for each of the periods shown for the portfolio of motor vehicle
contracts originated and serviced by AutoNation Financial Services. The
relatively short amount of time for which AutoNation Financial Services has
been involved in the origination of motor vehicle contracts results in
limited historical performance information with respect to the motor
vehicle contracts it originates and thus, delinquencies and loan losses may
differ from existing levels in the portfolio with the passage of time.
Moreover, delinquency and loss experience may be influenced by a variety of
economic, social and other factors.
DELINQUENCY EXPERIENCE OF AUTONATION FINANCIAL SERVICES'
MOTOR VEHICLE CONTRACT PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
At June 30, At June 30, At June 30,
2000 1999 1998
-------------------- ------------------- -----------------
Number of Number of Number of
Contracts Amount Contracts Amount Contracts Amount
--------- ------- --------- -------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
Serviced portfolio.......... 139,045 $1,760,489 9,717 $1,392,361 19,910 $272,880
Delinquencies
31-60 days (1)(2)........ 2,479 $32,394 1,329 $ 18,405 88 $ 1,217
61-90 days(1)(2)......... 319 $ 4,305 194 $ 2,642 10 $ 168
91+days(1)(2)............ 60 $ 860 23 $ 365 1 $ 8
Total delinquencies as a percentage of 2.06% 2.13% 1.55% 1.54% 0.50% 0.51%
servicing portfolio..
</TABLE>
(1) Delinquencies include principal amounts only.
(2) The period of delinquency is based on the number of days payments are
past due.
<TABLE>
<CAPTION>
At December 30, At December 30, At December 30,
1999 1998 1997
-------------------- ------------------- -----------------
Number of Number of Number of
Contracts Amount Contracts Amount Contracts Amount
--------- ------- --------- -------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
Serviced portfolio.......... 133,942 $1,811,934 55,460 $ 765,081 3,129 $ 36,777
Delinquencies
31-60 days (1)(2)........ 2,313 $ 31,741 775 $ 11,321 4 $ 43
61-90 days(1)(2)......... 393 $ 5,452 114 $ 1,711 1 $ 16
91+days(1)(2)............ 94 $ 1,326 23 $ 341 1 $ 6
Total delinquencies as a percentage of 2.09% 2.13% 1.64% 1.75% 0.19% 0.18%
servicing portfolio..
</TABLE>
(1) Delinquencies include principal amounts only.
(2) The period of delinquency is based on the number of days payments are
past due.
LOAN LOSS EXPERIENCE OF AUTONATION FINANCIAL SERVICES'
MOTOR VEHICLE CONTRACT PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, December 31,
------------------------------------- -----------------------------
2000 1999 1998 1999 1998 1997(1)
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Number of motor vehicle contracts 139,045 99,717 19,910 133,942 55,460 3,129
Period end principal outstanding. $ 1,760,481 $1,392,327 2,880 1,811,976 5,081 36,777
Average principal outstanding(3). 1,804,211 1,023,220 99,064 1,357,332 3,768 16,236
Number of gross charge-offs...... 2,258 1,013 24 2,738 339 -
Gross charge-offs(4)............. 16,023 5,390 15 14,638 1,170 -
Net charge-offs(5)............... 14,825 5,132 13 13,803 1,135 -
Net charge-offs as a percent of
average outstanding (6)........ 1.64% 1.00% 0.03% 1.02% 0.35% 0.00%
</TABLE>
(1) Includes information for the period from April 1997 through December
1997.
(2) Number of contracts as of period end.
(3) Computed by taking a simple average of monthly average outstanding
principal amounts for such period.
(4) Gross charge-offs are equal to the remaining principal balance less
proceeds from the sale of repossessed vehicles.
(5) Net charge-offs are equal to gross charge-offs, less recoveries, on
motor vehicle contracts previously charged-off. Net charge- offs
exclude expenses associated with collection, repossession and
disposition of motor vehicle contracts.
(6) Percentages have been annualized for the six months ended June 30,
2000 and are not necessarily indicative of experience for the year.
The delinquency and net loss rates set forth above reflect, among
other factors, the success of AutoNation Financial Services' collection
efforts and general economic conditions. At June 30, 2000, delinquencies
for the serviced portfolio represented 2.13% of the amount of motor vehicle
contracts in AutoNation Financial Services' serviced portfolio or $37.6
million as compared to 1.54% at June 30, 1999 or $21.4 million. The net
losses for the servicing portfolio as a percentage of average serviced
loans outstanding was 1.64% for the six months ended June 30, 2000 compared
to 1.00% for the six months ended June 30, 1999. The increases in the
delinquency rates on AutoNation Financial Services' serviced portfolio
since 1997 are consistent with management's expectation for a portfolio of
contracts with equivalent credit quality and average age of contract as
found in AutoNation Financial Services' serviced portfolio and are
consistent with industry experience for an originator which has been in
business for a similar period of time as AutoNation Financial Services.
During the initial period of operations of AutoNation Financial Services
the average age of the contracts in its serviced portfolio has necessarily
increased as the period of time during which AutoNation Financial Services
has been in business has increased. However, the average age of the
contracts in its serviced portfolio should stabilize as contracts begin to
mature and be paid off. As the average age stabilizes, management believes
that the delinquency rate should stabilize as well. This expectation is
supported by the stability in delinquency rates from December 31, 1999 to
June 30, 2000. However, AutoNation Financial Services has limited
performance data for the motor vehicle retail installment sales contracts
it originates. As AutoNation Financial Services' serviced portfolio of
contracts matures, delinquency percentages and loan losses may differ from
prior performance. It cannot be assured that the performance of the
contracts in the trust will be similar to the limited historical
performance of the portfolio set forth above.
DESCRIPTION OF THE CONTRACTS
All of the contracts in the receivables pool will be purchased by the
seller from AutoNation Financial Services. All of the contracts have been
originated by AutoNation Financial Services as of the Cut-Off Date from
loan application referrals received from dealers. See "AutoNation Financial
Services' Portfolio of Motor Vehicle Contracts" herein and in the
accompanying prospectus. The total principal balance of the contracts in
the receivables pool as of the close of business on June 30, 2000, was
$698,718,463.75. Each of the contracts in the trust will be a fixed rate
contract where the allocation of each payment between interest and
principal is calculated using the simple interest method. For a more
detailed explanation of this calculation method, see "Description of the
Contracts - Calculation Method" in the accompanying prospectus.
As of the Cut-Off Date, contracts included in the trust represented
obligors with mailing addresses in 50 states, the District of Columbia and
the other United States territories and possessions. As of the Cut-Off
Date, contracts related to obligors with mailing addresses in Florida
totaled 26.30% of the trust, contracts related to obligors with mailing
addresses in Texas totaled 17.58% of the trust and contracts related to
obligors with mailing addresses in California totaled 16.48% of the trust.
As of the Cut-Off Date, the aggregate principal balances of the contracts
related to obligors with mailing addresses in any other state did not
exceed 10%.
The contracts included in the trust were selected from the motor
vehicle contracts in AutoNation Financial Services' portfolio using the
criteria described below. No selection procedures were used with respect to
the contracts that are adverse to the noteholders or the insurer. Contracts
representing 38.43% of the Trust Property are secured by new vehicles, and
contracts representing 61.57% of the Trust Property are secured by used
vehicles. The seller may not substitute other contracts for the contracts
presently in the trust at any time during the term of the sale and
servicing agreement.
The seller will represent that each contract included in the trust
satisfies several eligibility requirements, including the following:
(1) the contract is secured by a new or used automobile or light-duty
truck;
(2) the contract has an annual percentage rate, also known as an APR,
of at least 7.50% and not more than 25.99%;
(3) the contract has a remaining maturity as of the Cut-Off Date of
not more than 72 months;
(4) the contract has an original maturity of not more than 72 months;
(5) the contract is a fully-amortizing fixed rate contract which
provides for level scheduled monthly payments determined on the
basis of the simple interest method (except for the first and
last payments, which may be minimally different from the level
payments);
(6) the contract has no payment of $40 or more that was 31 or more
days past due as of the Cut-Off Date;
(7) the contract has a remaining principal balance as of the Cut-Off
Date of not more than $75,000 and not less than $500;
(8) as of the Cut-Off Date, the seller or the servicer has not
identified the related obligor as being the subject of a
bankruptcy, insolvency, reorganization or other similar
proceeding;
(9) the contract is a retail installment sales contract;
(10) the contract was originated in the United States of America by
AutoNation Financial Services;
(11) the contract requires the related obligor to maintain physical
damage and theft insurance covering the related financed vehicle;
(12) the contract complied with AutoNation Financial Services' credit
and collection policies and procedures at the time of its
origination by AutoNation Financial Services;
(13) the related obligor under the contract does not have the right to
substitute, exchange or add any financed vehicle under the
contract;
(14) only one original executed copy of the contract exists; and
(15) the contract constitutes "chattel paper" under the Uniform
Commercial Code as in effect in the applicable jurisdiction.
Set forth below is selected data concerning the contracts as of the
Cut-Off Date which had a Pool Balance of $698,718,463.75.
COMPOSITION OF THE CONTRACTS
Aggregate principal balance of contracts $698,718,463.75
Number of contracts..................... 55,281
Average principal balance outstanding... $12,639.40
Principal Balance outstanding (range)... $508.91 to $74,144.82
Average original amount financed........ $15,671.45
Original amount financed (range)........ $1,617.30 to $85,495.22
Weighted average APR.................... 11.27%
APR (range)............................. 7.50% to 25.98%
Weighted average original term.......... 60.35 months
Original term (range)................... 12 to 72 months
Weighted average remaining term......... 47.92 months
Remaining term (range).................. 2 to 72 months
DISTRIBUTION OF THE CONTRACTS BY APR
<TABLE>
<CAPTION>
Number of % of Total Number of % of Cut-Off
APR Range Contracts Contracts Principal Balance Date Pool Balance
---------------- ------------ -------------- ------------------ -----------------
<S> <C> <C> <C> <C>
7.500 - 7.999% 5,686 10.$9% 81,119,218.51 1.61%
8.000 - 8.999% 8,923 16.14% 118,988,449.35 17.03%
9.000 - 9.999% 8,878 16.06% 113,338,624.98 16.22%
10.000 - 10.999% 6,962 12.59% 88,234,143.25 12.63%
11.000 - 11.999% 5,624 10.17% 70,529,897.60 10.09%
12.000 - 12.999% 4,850 8.77% 58,891,279.40 8.43%
13.000 - 13.999% 3,589 6.49% 43,847,181.23 6.28%
14.000 - 14.999% 2,748 4.97% 32,283,557.33 4.62%
15.000 - 15.999% 2,103 3.80% 25,115,639.25 3.59%
16.000 - 16.999% 2,024 3.66% 24,935,772.91 3.57%
17.000 - 17.999% 1,580 2.86% 17,745,872.02 2.54%
18.000 - 18.999% 1,168 2.11% 12,450,531.71 1.78%
19.000 - 19.999% 467 0.84% 4,526,808.37 0.65%
20.000 - 20.999% 317 0.57% 3,421,742.29 0.49%
21.000% and over 362 0.65% 3,289,745.54 0.47%
Total 55,281 100.00%(1) $ 698,7110 0.00%(1)
============ ============== ================ ===========
</TABLE>
(1) Percentages may not add to 100% due to rounding.
GEOGRAPHIC CONCENTRATION OF THE CONTRACTS
<TABLE>
<CAPTION>
Number of % of Total Number of % of Cut-Off
State Contracts Contracts Principal Balance Date Pool Balance
---------------- ------------ -------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Florida 15,377 27.82% $183,771,269.46 26.30%
Texas 10,032 18.15% 122,831,801.63 17.58%
California 8,010 14.49% 115,134,584.46 16.48%
Arizona 3,840 6.95% 53,505,437.77 7.66%
Georgia 3,808 6.89% 45,097,712.22 6.45%
Colorado 3,188 5.77% 41,575,320.84 5.95%
Nevada 2,648 4.79% 40,235,312.24 5.76%
Ohio 1,577 2.85% 15,694,812.84 2.25%
Michigan 1,437 2.60% 14,178,556.33 2.03%
Tennessee 991 1.79% 14,160,620.21 2.03%
Illinois 638 1.15% 8,041,938.34 1.15%
Indiana 473 0.86% 5,216,635.10 0.75%
Maryland 419 0.76% 5,152,289.74 0.74%
Alabama 334 0.60% 4,441,922.06 0.64%
New Jersey 338 0.61% 3,766,248.01 0.54%
North Carolina 302 0.55% 3,379,353.06 0.48%
Mississippi 221 0.40% 3,036,215.09 0.43%
Washington 236 0.43% 2,717,781.03 0.39%
South Carolina 171 0.31% 1,915,949.00 0.27%
Minnesota 157 0.28% 1,879,150.86 0.27%
Virginia 129 0.23% 1,462,218.29 0.21%
Arkansas 77 0.14% 1,258,944.64 0.18%
New York 106 0.19% 1,145,886.10 0.16%
Oklahoma 75 0.14% 842,786.83 0.12%
Kentucky 69 0.12% 755,143.95 0.11%
Other States(2) 628 1.14% 7,520,573.65 1.08%
Total 55,281 100.00%(1) $698,718,463.75 100.00%(1)
============ ============== ================ ===========
</TABLE>
(1) Percentages may not add to 100% due to rounding.
(2) No other state represents greater than 0.11% of the Cut-Off Date Pool
Balance.
Since the largest balance of contract obligors (based on mailing
addresses of the obligors) whose contracts were included in the trust as of
June 30, 2000 were located in Florida, Texas and California, adverse
changes in the economic conditions in these jurisdictions could have a
direct impact on the timing and amount of payments on the notes.
MODEL YEAR CONCENTRATION OF THE CONTRACTS
<TABLE>
<CAPTION>
Number of % of Total Number of % of Cut-Off
Year Contracts Contracts Principal Balance Date Pool Balance
---------------- ------------ -------------- ------------------ -----------------
<S> <C> <C> <C> <C>
1992 and earlier 1,272 2.3$% 6,246,107.63 0.89%
1993 1,836 3.32% 11,877,363.35 1.70%
1994 3,501 6.33% 27,785,779.78 3.98%
1995 6,851 12.39% 66,305,900.61 9.49%
1996 8,761 15.85% 99,182,404.86 14.19%
1997 9,118 16.49% 115,275,073.74 16.50%
1998 7,894 14.28% 102,974,694.44 14.74%
1999 12,118 21.92% 199,239,252.46 28.51%
2000 3,912 7.08% 69,410,599.94 9.93%
2001 18 0.03% 421,286.94 0.06%
Total 55,281 100.00%(1) $ 698,718,463 100.00%(1)
========== ================ ============== ============
</TABLE>
(1) Percentages may not add to 100% due to rounding.
MANUFACTURER CONCENTRATION OF THE CONTRACTS
<TABLE>
<CAPTION>
Number of % of Total Number of % of Cut-Off
Vehicle Make Contracts Contracts Principal Balance Date Pool Balance
---------------- ------------ -------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Ford 10,985 19.8$% 138,977,472.99 19.89%
Chevrolet 8,580 15.52% 118,296,868.61 16.93%
Nissan 5,082 9.19% 64,004,899.83 9.16%
Dodge 4,756 8.60% 62,708,719.56 8.97%
Toyota 4,750 8.59% 55,813,359.29 7.99%
Honda 3,869 7.00% 46,999,253.90 6.73%
Jeep 1,689 3.06% 22,937,282.22 3.28%
Pontiac 1,672 3.02% 17,641,926.99 2.52%
GMC 1,162 2.10% 17,615,540.20 2.52%
Mercury 1,448 2.62% 15,152,077.73 2.17%
Mazda 1,220 2.21% 12,493,341.43 1.79%
Chrysler 924 1.67% 11,952,696.88 1.71%
Isuzu 845 1.53% 11,786,170.99 1.69%
Mercedes Benz 444 0.80% 11,343,836.92 1.62%
Mitsubishi 874 1.58% 10,041,032.39 1.44%
Plymouth 662 1.20% 7,439,438.18 1.06%
Other Makes(2) 6,319 11.43% 73,514,545.64 10.52%
Total 55,281 100.00%(1) $ 698,718,463.75 100.00%(1)
=========== =============== ================ ============
</TABLE>
(1) Percentages may not add to 100% due to rounding.
(2) No other manufacturer represents greater than 1.0% of the Cut-Off Date
Pool Balance.
PREPAYMENT AND YIELD CONSIDERATIONS
The indenture provides that the noteholders may receive payments of
principal on the 15th day of each month (or if that day is not a business
day (i.e., a Saturday, Sunday, a day on which the insurer is closed or a
day on which banking institutions in New York, New York or in the city in
which the indenture trustee's corporate trust office or the owner trustee's
corporate trust office is located are authorized or obligated by law to be
closed), on the next succeeding business day), but will receive the full
outstanding principal amount of each class of notes no later than (1) in
the case of the class A-1 notes, August 15, 2001, (2) in the case of the
class A-2 notes, March 17, 2003, (3) in the case of the class A-3 notes,
May 17, 2004 and (4) in the case of the class A-4 notes, February 15, 2007.
Contracts are prepayable in full by the obligors at any time without
penalty. See "Prepayment and Yield Considerations" in the accompanying
prospectus regarding the effects of prepayments on the weighted average
life of the contracts. As the rate of payment of principal of each class of
notes depends primarily on the rate of payment (including prepayments) of
the principal of the contracts, final payment of any class of notes is
expected to occur earlier, and could occur significantly earlier, than the
respective Final Scheduled Distribution Dates for the notes. The rate of
payment of principal of each class of notes will be affected by the portion
of collections on the contracts relating to the Overcollateralization
Amount applied to the payment of principal of the notes. See "Risk
Factors--Potential prepayment of the notes may require reinvestment of
principal at a lower rate of return" herein. In addition, the rate of
payment of principal of each class of notes will be affected by the
incidence of delinquencies, defaults and losses on the contracts, the level
of overcollateralization and by any accelerated payments made on the notes
following an event of default under the indenture. See "Risk
Factors--Events of default under the indenture could result in losses or
acceleration of payments on the notes" herein. The trust can make no
prediction as to the actual prepayment rates that will be experienced on
the contracts in either stable or changing interest rate environments.
In addition, while it is anticipated that there will be monthly
principal and interest collections in an amount sufficient to pay the
outstanding principal amount of each class of notes on the applicable Final
Scheduled Distribution Dates, no assurance can be given in that regard.
Full payment of each class of notes by the applicable Final Scheduled
Distribution Dates depends on, among other things, the payment by obligors
of amounts due under the contracts and the fulfillment of the insurer's
obligations under the insurance policy. Noteholders will bear all
reinvestment risk resulting from a faster or slower incidence of prepayment
of receivables.
Prepayments on motor vehicle receivables can be measured relative to
a prepayment standard or model. The model used in this prospectus
supplement, the Absolute Prepayment Model ("ABS"), represents an assumed
rate of prepayment each month relative to the original number of contracts
in a pool of contracts. ABS further assumes that all the contracts are the
same size and amortize at the same rate and that each contract in each
month of its life will either be paid as scheduled or be prepaid in full.
For example, in a pool of contracts originally containing 10,000 contracts,
a 1% ABS rate means that 100 contracts prepay each month. ABS does not
purport to be an historical description of prepayment experience or a
prediction of the anticipated rate of prepayment of any pool of contracts,
including the receivables.
The tables captioned "Percent of Initial Class A-1 Note and Class A-2
Note Principal Balances at Various Absolute Prepayment Model Percentages"
and "Percent of Initial Class A-3 Note and Class A-4 Note Principal
Balances at Various Absolute Prepayment Model Percentages" have been
prepared on the basis of the characteristics of the contracts. Each
absolute prepayment model table assumes that (a) the receivables prepay in
full at the specified constant percentage of the ABS monthly, with no
defaults, losses or repurchases, (b) each scheduled monthly payment on the
receivables is made on the last day of each month and each month has 30
days, (c) payments on the notes are made on each payment date (and each
payment date is assumed to be the 15th day of each applicable month), (d)
an assumed closing date of August 10, 2000 and (e) the servicer exercises
its option to purchase the receivables. For purposes of this table, the
receivables have an assumed cut-off date of the Cut-Off Date. Each ABS
table indicates the projected weighted average life of each class of notes
and sets forth the percent of the original principal amount of each class
of notes that is projected to be outstanding after each of the payment
dates shown at various constant ABS percentages.
The ABS tables also assume that (a) the receivables have been
aggregated into several hypothetical pools with all of the receivables
having the characteristics set forth below and (b) the level scheduled
monthly payment (which is based on the pool's principal balance, weighted
average APR, weighted average original term to maturity and weighted
average remaining term to maturity as of the Cut-Off Date) will be such
that the pool will be fully amortized by the end of its remaining term to
maturity.
ASSUMED RECEIVABLES CHARACTERISTICS
Weighted Average Weighted Average
Aggregate Weighted Original Term Remaining Term
Principal Average To Maturity To Maturity
Pool Balance APR (In Months) (In Months)
-------- ------------- --------- --------------- ---------------
1 $ 18,981,986 10.953% 34 23
2 64,364,845 11.313% 48 35
3 12,163,274 14.155% 60 59
4 64,566,430 12.478% 60 52
5 210,238,485 10.740% 60 50
6 172,098,309 11.052% 60 40
7 47,327,098 11.179% 66 53
8 108,978,037 11.689% 72 62
------------- ---------- --------------- ---------------
$ 698,718,464 11.273% 60 48
The information included in the following tables represents
forward-looking statements and involves risks and uncertainties that could
cause actual results to differ materially from the results hypothesized in
the forward- looking statements. The actual characteristics and performance
of the contracts will differ from the assumptions used in constructing each
ABS table. The assumptions used are hypothetical and have been provided
only to give a general sense of how the principal cash flows might behave
under varying prepayment scenarios. For example, it is very unlikely that
the contracts will prepay at a constant level until maturity or that all of
the contracts will prepay at the same level. Moreover, the diverse terms of
contracts within each of the hypothetical pools could produce slower or
faster principal distributions than indicated in each ABS table at the
various constant ABS percentages specified, even if the original and
remaining terms to maturity of the contracts are as assumed. Any difference
between these assumptions and the actual characteristics and performance of
the contracts, or actual prepayment experience, will affect the percentages
of initial balances outstanding over time and the weighted average lives of
each class of notes.
PERCENT OF INITIAL CLASS A-1 NOTE AND CLASS A-2 NOTE PRINCIPAL BALANCES
AT VARIOUS ABSOLUTE PREPAYMENT MODEL PERCENTAGES
<TABLE>
<CAPTION>
CLASS A-1 NOTES CLASS A-2 NOTES
----------------------------- ------------------------------------------------
ASSUMED ABSOLUTE PREPAYMENT ASSUMED ABSOLUTE PREPAYMENT
MODEL PERCENTAGE MODEL PERCENTAGE
DISTRIBUTION ----------------------------- ------------------------------------------------
DATE 0.00% 1.00% 1.50% 1.75% 2.00% 0.00% 1.00% 1.50% 1.75% 2.00%
------------ ----- ----- ----- ----- ----- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLOSING DATE 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
September, 2000 85.25 76.03 70.27 67.00 63.40 100.00 100.00 100.00 100.00 100.00
October, 2000.. 77.78 64.20 55.73 50.91 45.62 100.00 100.00 100.00 100.00 100.00
November, 2000. 70.23 52.48 41.40 35.11 28.19 100.00 100.00 100.00 100.00 100.00
December, 2000. 62.62 40.86 27.30 19.59 11.12 100.00 100.00 100.00 100.00 100.00
January, 2001.. 54.93 29.36 13.41 4.36 0.00 100.00 100.00 100.00 100.00 95.87
February, 2001. 47.17 17.97 0.00 0.00 0.00 100.00 100.00 99.82 92.19 83.80
March, 2001.... 39.34 6.69 0.00 0.00 0.00 100.00 100.00 89.91 81.38 72.01
April, 2001.... 31.43 0.00 0.00 0.00 0.00 100.00 96.69 80.17 70.79 60.49
May, 2001...... 23.45 0.00 0.00 0.00 0.00 100.00 88.54 70.61 60.44 49.26
June, 2001..... 15.40 0.00 0.00 0.00 0.00 100.00 80.47 61.23 50.31 38.32
July, 2001..... 7.27 0.00 0.00 0.00 0.00 100.00 72.49 52.02 40.42 27.67
August, 2001... 0.00 0.00 0.00 0.00 0.00 99.31 64.60 43.01 30.76 17.32
September, 2001 0.00 0.00 0.00 0.00 0.00 93.19 56.80 34.17 21.34 7.27
October, 2001.. 0.00 0.00 0.00 0.00 0.00 87.02 49.10 25.53 12.17 0.00
November, 2001. 0.00 0.00 0.00 0.00 0.00 80.79 41.50 17.08 3.25 0.00
December, 2001. 0.00 0.00 0.00 0.00 0.00 74.50 33.99 8.83 0.00 0.00
January, 2002.. 0.00 0.00 0.00 0.00 0.00 68.15 26.58 0.78 0.00 0.00
February, 2002. 0.00 0.00 0.00 0.00 0.00 61.75 19.27 0.00 0.00 0.00
March, 2002.... 0.00 0.00 0.00 0.00 0.00 55.28 12.06 0.00 0.00 0.00
April, 2002.... 0.00 0.00 0.00 0.00 0.00 48.75 4.96 0.00 0.00 0.00
May, 2002...... 0.00 0.00 0.00 0.00 0.00 42.16 0.00 0.00 0.00 0.00
June, 2002..... 0.00 0.00 0.00 0.00 0.00 35.51 0.00 0.00 0.00 0.00
July, 2002..... 0.00 0.00 0.00 0.00 0.00 29.21 0.00 0.00 0.00 0.00
August, 2002... 0.00 0.00 0.00 0.00 0.00 22.84 0.00 0.00 0.00 0.00
September, 2002 0.00 0.00 0.00 0.00 0.00 16.41 0.00 0.00 0.00 0.00
October, 2002.. 0.00 0.00 0.00 0.00 0.00 9.93 0.00 0.00 0.00 0.00
November, 2002. 0.00 0.00 0.00 0.00 0.00 3.38 0.00 0.00 0.00 0.00
December, 2002. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
January, 2003.. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
February, 2003. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
March, 2003.... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
April, 2003.... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
May, 2003...... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June, 2003..... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
July, 2003..... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
August, 2003... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
September, 2003 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
October, 2003.. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November, 2003. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
December, 2003. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
January, 2004.. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
February, 2004. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
March, 2004.... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
April, 2004.... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
May, 2004...... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June, 2004..... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Weighted Average 0.53 0.34 0.27 0.24 0.22 1.70 1.22 1.00 0.90 0.81
life (in years)(1)..
</TABLE>
(1) The weighted average life of a note is determined by (a) multiplying
the amount of each principal payment of the note by the number of
years from the date of the issuance of the note to the Distribution
Date on which the principal payment is made, (b) adding the results
and (c) dividing the sum by the initial principal balance of the note.
The ABS tables have been prepared based on the assumptions described above
(including the assumptions regarding the characteristics and performance of
the contracts which will differ from the actual characteristics and
performance thereof) and should be read in conjunction therewith.
PERCENT OF INITIAL CLASS A-3 NOTE AND CLASS A-4 NOTE PRINCIPAL BALANCES
AT VARIOUS ABSOLUTE PREPAYMENT MODEL PERCENTAGES
<TABLE>
<CAPTION>
CLASS A-3 NOTES CLASS A-4 NOTES
----------------------------- ------------------------------------------------
ASSUMED ABSOLUTE PREPAYMENT ASSUMED ABSOLUTE PREPAYMENT
MODEL PERCENTAGE MODEL PERCENTAGE
DISTRIBUTION ------------------------------ ------------------------------------------------
DATE 0.00% 1.00% 1.50% 1.75% 2.00% 0.00% 1.00% 1.50% 1.75% 2.00%
------------ ----- ----- ----- ----- ----- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date.... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
September, 2000. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
October, 2000... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
November, 2000.. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
December, 2000.. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
January, 2001... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
February, 2001.. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
March, 2001..... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
April, 2001..... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
May, 2001....... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
June, 2001...... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
July, 2001...... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
August, 2001.... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
September, 2001. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
October, 2001... 100.00 100.00 100.00 100.00 97.13 100.00 100.00 100.00 100.00 100.00
November, 2001.. 100.00 100.00 100.00 100.00 86.22 100.00 100.00 100.00 100.00 100.00
December, 2001.. 100.00 100.00 100.00 93.73 75.66 100.00 100.00 100.00 100.00 100.00
January, 2002... 100.00 100.00 100.00 84.00 65.48 100.00 100.00 100.00 100.00 100.00
February, 2002.. 100.00 100.00 91.82 74.57 55.67 100.00 100.00 100.00 100.00 100.00
March, 2002..... 100.00 100.00 82.97 65.44 46.24 100.00 100.00 100.00 100.00 100.00
April, 2002..... 100.00 100.00 74.36 56.62 37.19 100.00 100.00 100.00 100.00 100.00
May, 2002....... 100.00 97.64 66.00 48.11 28.53 100.00 100.00 100.00 100.00 100.00
June, 2002...... 100.00 89.67 57.88 39.92 20.27 100.00 100.00 100.00 100.00 100.00
July, 2002...... 100.00 82.17 50.28 32.28 12.60 100.00 100.00 100.00 100.00 100.00
August, 2002.... 100.00 74.79 42.93 24.95 5.30 100.00 100.00 100.00 100.00 100.00
September, 2002. 100.00 67.53 35.81 17.93 0.00 100.00 100.00 100.00 100.00 96.87
October, 2002... 100.00 60.39 28.94 11.23 0.00 100.00 100.00 100.00 100.00 84.17
November, 2002.. 100.00 53.38 22.32 4.85 0.00 100.00 100.00 100.00 100.00 72.26
December, 2002.. 96.27 46.50 15.96 0.00 0.00 100.00 100.00 100.00 97.65 0.00
January, 2003... 88.55 39.75 9.86 0.00 0.00 100.00 100.00 100.00 86.48 0.00
February, 2003.. 80.76 33.13 4.02 0.00 0.00 100.00 100.00 100.00 75.98 0.00
March, 2003..... 72.90 26.65 0.00 0.00 0.00 100.00 100.00 96.95 66.13 0.00
April, 2003..... 64.97 20.30 0.00 0.00 0.00 100.00 100.00 86.60 0.00 0.00
May, 2003....... 56.96 14.09 0.00 0.00 0.00 100.00 100.00 76.78 0.00 0.00
June, 2003...... 48.88 8.02 0.00 0.00 0.00 100.00 100.00 67.50 0.00 0.00
July, 2003...... 41.82 2.75 0.00 0.00 0.00 100.00 100.00 0.00 0.00 0.00
August, 2003.... 34.70 0.00 0.00 0.00 0.00 100.00 95.30 0.00 0.00 0.00
September, 2003. 27.52 0.00 0.00 0.00 0.00 100.00 85.50 0.00 0.00 0.00
October, 2003... 20.26 0.00 0.00 0.00 0.00 100.00 75.95 0.00 0.00 0.00
November, 2003.. 12.94 0.00 0.00 0.00 0.00 100.00 66.66 0.00 0.00 0.00
December, 2003.. 8.18 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00 0.00
January, 2004... 3.37 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00 0.00
February, 2004.. 0.00 0.00 0.00 0.00 0.00 97.11 0.00 0.00 0.00 0.00
March, 2004..... 0.00 0.00 0.00 0.00 0.00 87.56 0.00 0.00 0.00 0.00
April, 2004..... 0.00 0.00 0.00 0.00 0.00 77.91 0.00 0.00 0.00 0.00
May, 2004....... 0.00 0.00 0.00 0.00 0.00 68.17 0.00 0.00 0.00 0.00
June, 2004...... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Weighted Average 2.90 2.36 2.00 1.81 1.62 3.79 3.28 2.87 2.62 2.31
Life (in years)
</TABLE>
(1) The weighted average life of a note is determined by (a) multiplying
the amount of each principal payment of the note by the number of
years from the date of the issuance of the note to the Distribution
Date on which the principal payment is made, (b) adding the results
and (c) dividing the sum by the initial principal balance of the
note.
The ABS tables have been prepared based on the assumptions described above
(including the assumptions regarding the characteristics and performance of
the contracts which will differ from the actual characteristics and
performance thereof) and should be read in conjunction therewith.
USE OF PROCEEDS
The net proceeds of the initial sale of the notes will be used by the
trust to purchase the contracts from the seller pursuant to the sale and
servicing agreement and to fund the deposits in the spread account
maintained for the benefit of the noteholders and the insurer. The net
proceeds to be received by the seller from the sale of the contracts to the
trust will be used by the seller to repay indebtedness incurred, or to pay
other amounts owed, in connection with its acquisition of the contracts
from AutoNation Financial Services and to pay other expenses in connection
with the pooling of the contracts and the issuance of the notes. AutoNation
Financial Services will use the proceeds from the sale of the contracts for
general corporate purposes. In addition, AutoNation Financial Services or
its affiliates may apply all or any portion of the net proceeds of this
offering to the repayment of debt, including "warehouse" debt secured by
the contracts (prior to their sale to the trust). One or more of the
underwriters (or (1) their respective affiliates or (2) entities for which
their respective affiliates act as administrator and/or provide liquidity
lines) may have acted as a "warehouse lender" to AutoNation Financial
Services or its affiliates, and may receive a portion of the proceeds as
repayment of that "warehouse" debt.
DESCRIPTION OF THE NOTES
The notes will be issued pursuant to the terms of the indenture. A
copy of the indenture will be filed with the Securities and Exchange
Commission following the issuance of the notes. The following summaries,
together with the summaries contained under "Description of the Securities"
and "Description of the Indenture" in the accompanying prospectus, describe
all of the material terms of the notes and the indenture. However, these
summaries do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all of the provisions of the
notes and the indenture. Where particular provisions of or terms used in
the indenture are referred to, the actual provisions (including definitions
of terms) are incorporated by reference as part of the summaries. The
following summaries supplement the description of the general terms and
provisions of the indenture set forth under the heading "Description of the
Indenture" in the accompanying prospectus, to which description reference
is hereby made.
ISSUANCE AND REGISTRATION OF THE NOTES
The notes of each class will be offered for purchase in minimum
denominations of $1,000 and integral multiples thereof, except that one
note of each class may be issued in a different denomination. The notes
will initially be represented by one or more physical certificates
registered in the name of Cede & Co., as nominee of The Depository Trust
Company, also known as DTC. The interests of holders of beneficial
interests in the global notes will be available for purchase in book-entry
form only. Unless and until the notes are issued in definitive registered
form under the limited circumstances described herein, no holder of a
beneficial interest in a global note will be entitled to receive a
definitive certificate representing that person's interest in the notes.
All references herein to actions by noteholders shall refer to actions
taken by DTC upon instructions from its participating organizations and all
references herein to payments, distributions, notices, reports and
statements to noteholders shall refer to distributions, notices, reports
and statements to DTC or Cede & Co., as the registered holder of the notes,
as the case may be, for distribution to holders of beneficial interests in
a global note in accordance with DTC procedures. See "Description of the
Securities - Book-Entry Registration" and "-Definitive Securities" in the
accompanying prospectus.
Unless and until notes in definitive registered form have been
issued, payments on each Distribution Date will be made through the
facilities of DTC and the related Record Date will be the business day
prior to that Distribution Date. If notes in definitive registered form are
issued, the related Record Date will be the last day of the calendar month
preceding the Distribution Date. The final payment of principal of, and
interest on, each note will be made only upon presentation and surrender of
the note at the office or agency of the indenture trustee maintained for
that purpose.
INTEREST PAYMENTS
Interest on the outstanding principal amount of each class of notes
will accrue at a per annum rate equal to the applicable interest rate for
that class of notes and, except as otherwise provided herein, will be
distributed to the noteholders monthly on each Distribution Date,
commencing September 15, 2000, and on the applicable Final Scheduled
Distribution Date. The interest period with respect to any Distribution
Date will be the period from the previous Distribution Date to but
excluding the current Distribution Date (which period will be assumed to be
thirty days for the class A-2 notes, class A-3 notes and class A-4 notes)
or, in the case of the first Distribution Date, from and including the
Closing Date, to but excluding the first Distribution Date. Interest on the
class A-1 notes will be calculated on the basis of the actual number of
days in the related Interest Accrual Period and a 360-day year. Interest on
the class A-2 notes, the class A-3 notes and the class A-4 notes will be
calculated on the basis of a 360- day year consisting of twelve 30-day
months.
The class A-1 notes will bear interest at the rate of 6.72462% per
annum, the class A-2 notes will bear interest at the rate of 7.00% per
annum, the class A-3 notes will bear interest at the rate of 7.06% per
annum and the class A-4 notes will bear interest at the rate of 7.15% per
annum.
Interest accrued but not paid to the holders of any class of notes on
any Distribution Date will be due on the immediately succeeding
Distribution Date, together with, to the extent permitted by applicable
law, interest on the shortfall at the related interest rate for that class
of notes. Interest distributions with respect to the notes will be made as
described below under "Description of the Transfer and Servicing Agreements
- Distributions" herein.
PRINCIPAL PAYMENTS
Principal payments will be made to the noteholders, to the extent
described below, on each Distribution Date in an amount equal to the Note
Principal Distributable Amount. See "Description of the Transfer and
Servicing Agreements - Distributions" herein.
Principal payments on the notes will be applied on each Distribution
Date from the note distribution account in the following order of priority:
(1) to the holders of the class A-1 notes until the principal
amount of the class A-1 notes has been reduced to zero;
(2) to the holders of the class A-2 notes until the principal
amount of the class A-2 notes has been reduced to zero;
(3) to the holders of the class A-3 notes until the principal
amount of the class A-3 notes has been reduced to zero; and
(4) to the holders of the class A-4 notes until the principal
amount of the class A-4 notes has been reduced to zero.
The principal amount of each class of notes, to the extent not
previously paid, will be due on the related Final Scheduled Distribution
Date for that class of notes. The actual date on which the outstanding
principal amount of any class of notes is paid is expected to be earlier,
and could be significantly earlier, than the Final Scheduled Distribution
Date for that class and will be based on a variety of factors, including
the factors described under "Prepayment and Yield Considerations" herein
and in the accompanying prospectus. Any assets remaining in the trust after
the payment in full of the notes and of any amounts owed to the servicer,
the trustees and the insurer will be distributed to the holder of the
residual interest in the trust, which initially will be the seller,
pursuant to the terms of the owner trust agreement and the sale and
servicing agreement.
OPTIONAL REDEMPTION
Any outstanding notes will be subject to redemption in whole, but not
in part, on any Distribution Date relating to an Optional Purchase. See
"Description of the Transfer and Servicing Agreements - Optional Purchase"
herein. If the servicer exercises an Optional Purchase, all outstanding
notes will be redeemed at a redemption price for each class of notes equal
to the unpaid principal amount of that class of notes plus accrued and
unpaid interest thereon at the applicable interest rate. The servicer will
not be permitted to exercise an Optional Purchase unless there would be
sufficient funds as a result of the Optional Purchase to retire the notes
in full and to pay all amounts owed to the insurer, the servicer, the
indenture trustee and the owner trustee.
THE INDENTURE TRUSTEE
The Chase Manhattan Bank will be the indenture trustee. The indenture
trustee is a New York banking corporation and its Corporate Trust Office is
located at 450 West 33rd Street, 14th Floor, New York, New York 10001. The
indenture trustee will have the rights and duties set forth under
"Description of the Transfer and Servicing Agreements - The Owner Trustee
and Indenture Trustee" in the accompanying prospectus.
EVENTS OF DEFAULT UNDER THE INDENTURE
An event of default under the indenture will include, among other
things, the occurrence of any of the following events:
(1) the delivery to the insurer of a claim for payment under the
insurance policy;
(2) a default for five days or more in the payment of any
interest on any note;
(3) a default in the payment of any principal on the applicable
Final Scheduled Distribution Date for a class of notes;
(4) a default in the observance or performance of any covenant or
agreement of the trust made in the indenture and the continuation of
any default for a period of 30 days after notice thereof is given to
the trust by the indenture trustee or the insurer, or to the trust,
the insurer and the indenture trustee by the holders of at least 25%
in principal amount of the notes then outstanding acting together as a
single class, in each case specifying the event of default and
requiring it to be remedied;
(5) the failure of the indenture trustee to have a valid
perfected first priority security interest in the Trust Property;
(6) the failure of the receivables purchase agreement, the sale
and servicing agreement, the owner trust agreement, the administration
agreement, the insurance agreement, the indenture or any of the other
basic documents relating to the transaction, as each may have been
amended or supplemented from time to time, to be in full force and
effect at any time;
(7) any representation or warranty made by the trust in the
indenture or in any certificate delivered pursuant thereto or in
connection therewith was incorrect in a material respect as of the
time made, and the breach is not cured within 30 days after notice
thereof is given to the trust by the indenture trustee or the insurer,
or to the trust, the insurer and the indenture trustee by the holders
of at least 25% in principal amount of the notes then outstanding
acting together as a single class, in each case specifying the breach
and requiring it to be remedied; or
(8) a Trust Bankruptcy Event;
provided that so long as no Insurer Default shall have occurred and be
continuing, neither the indenture trustee nor the noteholders may
accelerate the notes under the indenture. So long as an Insurer Default
shall not have occurred and be continuing, acceleration of the notes under
the indenture will occur only upon delivery by the insurer to the trust and
the indenture trustee of notice that the notes are immediately due and
payable. The failure to pay principal of a class of notes will not result
in the occurrence of an event of default under the indenture until the
Final Scheduled Distribution Date for that class of notes.
Upon the occurrence of an event of default under the indenture, so
long as an Insurer Default shall not have occurred and be continuing, the
insurer will have the right, but not the obligation, to cause the indenture
trustee to liquidate the Trust Property, in whole or in part, on any date
or dates following the acceleration of the notes due to the event of
default as the insurer, in its sole discretion, shall elect. The insurer
may not, however, cause the indenture trustee to liquidate the Trust
Property, in whole or in part, if the proceeds of the liquidation would not
be sufficient to pay all outstanding principal of, and accrued interest on,
the notes unless the event of default arose from a claim made on the
insurance policy or from a Trust Bankruptcy Event. Following the occurrence
of any event of default under the indenture, the indenture trustee will
continue to submit claims under the insurance policy for any shortfalls in
amounts available to make payments or distributions of guaranteed amounts
on the notes. However, following the occurrence of an event of default
under the indenture (so long as an Insurer Default shall not have occurred
and be continuing), the insurer, at its sole option, may elect to pay all
or any portion of the outstanding amount of the notes, plus accrued
interest thereon to the date of the payment. See "Description of the
Insurance Policy" herein.
If an Insurer Default has occurred and is continuing, upon the
occurrence of an event of default under the indenture (other than an event
of default occurring solely because of a claim for payment under the
insurance policy), the holders of at least 66 2/3% of the principal amount
of the notes then outstanding may declare the principal of the notes to be
immediately due and payable. If an Insurer Default has occurred and is
continuing and an event of default under the indenture shall have occurred
and be continuing (other than an event of default occurring solely because
of a claim for payment under the insurance policy), the holders of at least
66 2/3% of the principal amount of the notes then outstanding will have the
right to control the exercise of remedies available with respect to the
event of default, including the right to direct the indenture trustee to
maintain possession of the Trust Property or to liquidate the Trust
Property in whole or in part; provided, however, that those noteholders may
not direct the indenture trustee to liquidate the Trust Property in whole
or in part unless (1) the event of default has occurred because of a
Payment Default or a Trust Bankruptcy Event, and in either case the insurer
shall have failed to make a payment required under the insurance policy in
accordance with its terms or (2)(A) an event of default under the indenture
has occurred other than as described in clause (1), (B) the insurer shall
not have failed to make a payment required under the insurance policy in
accordance with its terms and (C) the proceeds of the sale will be
sufficient to pay all principal on the notes, together with accrued
interest thereon, and all amounts owing to the insurer under the insurance
agreement or otherwise. In the event of a sale of the contracts as
described in clause (2) of the preceding sentence, the insurance policy
will not be available to cover losses to noteholders resulting from the
sale and will be terminated and the insurer will have no further obligation
to make any payment thereunder. See "Risk Factors - Events of default under
the indenture could result in losses or acceleration of payments on the
notes" herein.
AMENDMENT UNDER THE INDENTURE
The indenture may be amended by the parties thereto with prior notice
to each rating agency and the consent of the insurer, but without the
consent of the noteholders to cure any ambiguity, to correct or supplement
any provisions therein which may be inconsistent with any other provisions
therein, or to evidence the succession of another person to the trust or
the trustee. The indenture may also be amended by the parties thereto with
prior notice to each rating agency and the consent of the insurer, but
without the consent of the noteholders to add or change any other
provisions of the indenture or to modify in any manner the rights of the
noteholders under the indenture; provided that (1) such amendment will not
(A) as evidenced by an opinion of counsel, materially and adversely affect
the interest of any noteholder or (B) as evidenced by a letter from each
rating agency which has rated the notes, result in a downgrading or
withdrawal of the then current ratings assigned to the notes by that rating
agency without regard to the insurance policy and (2) an opinion of counsel
as to applicable tax matters is delivered. The indenture may also be
amended by the parties thereto with prior notice to each rating agency and
the consent of the insurer and, so long as the notes are outstanding and an
Insurer Default has occurred and is continuing, the holders of notes
evidencing not less than a majority of the principal amount of the notes
then outstanding, acting together as a single class, for the purpose of
adding any provisions to or changing in any manner or eliminating any of
the provisions of the indenture or of modifying, in any manner, the rights
of the noteholders under the indenture; provided, however, that subject to
the rights of the insurer, no amendment may, without the consent of each
noteholder affected (1) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, distributions that are required to be
made for the benefit of the noteholders, (2) reduce the aforesaid
percentage of the noteholders which are required to consent to any
amendment of the indenture or (3) result in a taxable event to any of the
noteholders for federal income tax purposes or result in the trust being an
association or publicly traded partnership taxable as a corporation for
federal income tax purposes. For a further discussion regarding amendments
to the indenture, see "Description of the Indenture - Modifications of
Indenture" in the accompanying prospectus.
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes selected terms of the sale and
servicing agreement and the owner trust agreement. Copies of the sale and
servicing agreement and the owner trust agreement will be filed with the
SEC following the issuance of the notes. The following summary does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, all of the provisions of the sale and servicing agreement and
the owner trust agreement. Where particular provisions of or terms used in
the sale and servicing agreement or the owner trust agreement are referred
to, the actual provisions (including definitions of terms) are incorporated
by reference as part of the summary. The following summary supplements the
description of the general terms and provisions of the sale and servicing
agreement and the owner trust agreement set forth under the heading
"Description of the Transfer and Servicing Agreements" in the accompanying
prospectus, to which description reference is hereby made.
SALE AND ASSIGNMENT OF THE CONTRACTS
Pursuant to the receivables purchase agreement between the seller and
AutoNation Financial Services, prior to the issuance of the notes,
AutoNation Financial Services will sell and assign to the seller its entire
interest in the contracts and the proceeds thereof, including its security
interests in the financed vehicles. In turn, the seller will sell and
assign to the trust, without recourse, the seller's entire interest in the
contracts and the proceeds thereof, including its security interest in the
financed vehicles. Each contract will be identified in a schedule appearing
as an exhibit to the sale and servicing agreement. Concurrently with the
sale and assignment of the contracts, the trust will pledge the assets
acquired by it to the indenture trustee pursuant to the indenture, and
definitive certificates representing the notes will be delivered to the
underwriters of the notes in exchange for payment to the seller of the net
purchase price of the notes. The trust will also pledge its rights under
the sale and servicing agreement to the indenture trustee as collateral for
the notes, and the trust's rights under the sale and servicing agreement
may be enforced directly by the indenture trustee. See "Description of the
Transfer and Servicing Agreements--Sale and Assignment of the Contracts" in
the accompanying prospectus.
THE ACCOUNTS
The Collection Account. The indenture trustee will establish and
maintain an account, known as the collection account, in the name of the
indenture trustee into which the servicer will deposit all collections from
the related contracts. Funds in the collection account will be invested in
Eligible Investments by or on behalf of the indenture trustee, acting at
the direction of the servicer. Eligible Investments made with amounts on
deposit in the collection account will mature no later than the business
day preceding the following Distribution Date after they were invested. Any
income from amounts on deposit in the collection account which were
invested in Eligible Investments will be deposited in or credited to the
collection account and any loss resulting from those investments will be
charged to the collection account. See "Description of the Transfer and
Servicing Agreements--The Collection Account and Eligible Investments" in
the accompanying prospectus.
The Payment Account. The indenture trustee shall establish and
maintain an account, known as the payment account, in the name of the
indenture trustee, into which amounts released from the collection account
for distribution to noteholders will be deposited prior to the transfer of
those amounts to the note distribution account.
The Note Distribution Account. The indenture trustee will establish
and maintain an account, known as the note distribution account, in the
name of the indenture trustee on behalf of the noteholders, into which
amounts released from the payment account for distribution to noteholders
will be deposited and from which all distributions to noteholders will be
made.
The Spread Account. The indenture trustee will establish and maintain
an account, known as the spread account, in the name of the indenture
trustee for the benefit of the noteholders and the insurer as described
under "Description of the Transfer and Servicing Agreements--The Spread
Account" and "--Withdrawals from the Spread Account" herein.
PAYMENTS ON CONTRACTS
All Available Funds relating to the contracts will be deposited in or
credited to the collection account by the servicer within two business days
of the receipt of payments from obligors. Available Funds with respect to a
Distribution Date and the related Collection Period will include the
following:
(1) amounts received with respect to the contracts in the related
Collection Period representing monthly principal and interest
payments;
(2) full and partial prepayments by the related obligor;
(3) any Net Liquidation Proceeds;
(4) any Net Insurance Proceeds;
(5) any amounts deposited by AutoNation Financial Services or the
seller, as applicable, in the collection account to purchase or
repurchase contracts because of material defects in documents related
to the contracts or breaches of representations or warranties
regarding the contracts made by the seller in the sale and servicing
agreement that materially and adversely affect the interests of the
indenture trustee, the owner trustee, the noteholders or the insurer;
(6) any amounts deposited by the servicer in the collection
account to purchase contracts as a remedy for breach of the servicer's
representations, warranties and covenants relating to the servicing of
the contracts;
(7) any amounts deposited by the servicer in the collection
account pursuant to an Optional Purchase; and
(8) income from Eligible Investments of funds on deposit in the
Trust Accounts.
DISTRIBUTIONS
On the business day immediately preceding each Distribution Date, the
indenture trustee will cause funds equal to the amount of Available Funds
with respect to that Distribution Date to be withdrawn from the collection
account and deposit those funds into the payment account. On each
Distribution Date, the indenture trustee, based solely on the statement for
that Distribution Date received from the servicer, will apply the Available
Funds on deposit in the payment account available with respect to the
related Collection Period together with amounts, if any, withdrawn from the
spread account and any amounts representing payment of the Insured Payment
as described herein, to make the following deposits and distributions in
the following amounts and order of priority:
(1) to the servicer, from Available Funds and amounts, if any,
withdrawn from the spread account, the servicing fee for that
Distribution Date, including any unpaid servicing fees with respect
to one or more prior Distribution Dates;
(2) to the indenture trustee and the owner trustee, from
Available Funds (after giving effect to the reduction in Available
Funds described in clause (1) above) and amounts, if any, withdrawn
from the spread account, any accrued and unpaid fees and expenses of
the indenture trustee and the owner trustee, in each case to the
extent those fees and expenses have not been previously paid by the
servicer; provided that such payments pursuant to this clause (2)
will not during any calendar year exceed $75,000 in the aggregate;
(3) to the insurer, from Available Funds (after giving effect
to the reduction in Available Funds described in clauses (1) and (2)
above) and amounts, if any, withdrawn from the spread account, the
insurance premium (as defined in the insurance agreement) for that
Distribution Date owing to the insurer under the insurance agreement;
(4) to the note distribution account, from Available Funds
(after giving effect to the reduction in Available Funds described in
clauses (1) through (3) above) and amounts, if any, withdrawn from
the spread account and any amounts representing payment of the
Insured Payment, the Note Interest Distributable Amount to be
distributed to the holders of notes at their respective interest
rates on a pro rata basis;
(5) to the note distribution account, if the Distribution Date
is a Final Scheduled Distribution Date for any class of notes, the
Note Principal Distributable Amount to the extent of the remaining
outstanding principal amount of that class of notes, from Available
Funds (after giving effect to the reduction in Available Funds
described in clauses (1) through (4) above) and amounts, if any,
withdrawn from the spread account and any amounts representing
payment of the Insured Payment, to be paid to the holders of that
class of notes;
(6) to the note distribution account, from Available Funds
(after giving effect to the reduction in Available Funds described in
clauses (1) through (5) above) and amounts, if any, withdrawn from
the spread account and any amounts representing payment of the
Insured Payment, the remaining Note Principal Distributable Amount
(after giving effect to the payment, if any, described in clause (5)
above), to be distributed first to the holders of class A-1 notes
until the principal amount of the class A-1 notes has been reduced to
zero, then to the holders of class A-2 notes until the principal
amount of the class A-2 notes has been reduced to zero, then to the
holders of class A-3 notes until the principal amount of the class
A-3 notes has been reduced to zero and then to the holders of class
A-4 notes until the principal amount of the class A-4 notes has been
reduced to zero;
(7) to the insurer, from Available Funds (after giving effect
to the reduction in Available Funds described in clauses (1) through
(6) above) and amounts, if any, withdrawn from the spread account,
all remaining amounts owing to the insurer under the insurance
agreement or otherwise;
(8) to the spread account, from Available Funds (after giving
effect to the reduction in Available Funds described in clauses (1)
through (7) above), the amount, if any, required to increase the
amount on deposit therein to the Spread Account Required Amount;
(9) to the indenture trustee or the owner trustee, if
applicable, from Available Funds (after giving effect to the
reduction in Available Funds described in clauses (1) through (8)
above), the amount of any fees and reasonable expenses not paid under
clause (2) above as a result of the dollar limitation on fees and
reasonable expenses set forth in clause (2);
(10) to the indenture trustee or the successor servicer, if
applicable, from Available Funds (after giving effect to the
reduction in Available Funds described in clauses (1) through (9)
above), the amount of any reasonable expenses not paid by the
servicer incurred in connection with reliening documentation relating
to financed vehicles;
(11) to the successor servicer, if applicable, from Available
Funds (after giving effect to the reduction in Available Funds
described in clauses (1) through (10) above), reasonable expenses not
paid by the servicer incurred in connection with the transfer of
servicing from the servicer to the successor servicer and the amount
of any additional servicing fee owing to the successor servicer in
excess of the servicing fee for that Distribution Date; and
(12) any remaining Available Funds will be distributed to the
holder of the residual interest in the trust.
EARLY REPAYMENT
If the repayment of principal of and interest on the notes is
accelerated following the occurrence of an event of default under the
indenture, amounts collected and, as directed by the insurer, amounts on
deposit in the Spread Account will be applied in the following order of
priority:
(1) to the servicer, to pay any unpaid servicing fee;
(2) to the indenture trustee or the owner trustee, as
applicable, to pay any accrued and unpaid fees and reasonable
expenses of the indenture trustee or the owner trustee;
(3) to the noteholders, to pay any accrued and unpaid interest
on each class of notes on a pro rata basis based on the interest
accrued (including interest accrued on past due interest) on each
class of notes;
(4) to the noteholders, to pay principal on each class of
notes, on a pro rata basis based on the aggregate principal balance
of each class of notes, until the aggregate principal balance of each
class of notes is reduced to zero;
(5) to the insurer, to pay amounts owing to the insurer under the
insurance agreement or otherwise, including the insurance premium; and
(6) any remaining funds will be distributed to the holder of the
residual interest in the trust.
Amounts on deposit in the spread account on a Distribution Date will
be available to make payments and distributions to the appropriate parties
on that Distribution Date as described under "-Withdrawals from the Spread
Account" herein and to make the payments and distributions, as directed by
the insurer, pursuant to clauses (1) through (5) above upon the occurrence
of an early repayment. Under the insurance policy, the insurer is obligated
to provide for payment to the indenture trustee on each Distribution Date
of any Insured Payment.
PAYMENT PRIORITIES OF THE NOTES
The rights of the noteholders to receive distributions with respect
to the contracts will be subordinated to the rights of the servicer (to the
extent that the servicer has not been paid all servicing fees), the
indenture trustee and the owner trustee (to the extent the indenture
trustee and the owner trustee have not received all fees due and payable to
them by the servicer) and the insurer (to the extent the insurer has not
received the insurance premium). In addition, the rights of the noteholders
to receive distributions with respect to the contracts will be subject to
the priorities set forth under "-Distributions" above. The spread account,
the Overcollateralization Amount and the insurance policy are intended to
enhance the likelihood of timely repayment to the noteholders of the full
amount of interest and principal owed to them, and to afford the
noteholders limited protection against losses in respect of the contracts
as described in "--The Spread Account," "--Overcollateralization" and
"Description of the Insurance Policy" below.
THE SPREAD ACCOUNT
The foregoing protection will be effected both by the preferential
right of the noteholders to receive, to the extent described herein,
current distributions with respect to the contracts, and by the
establishment of the spread account. Amounts held from time to time in the
spread account are intended to enhance the likelihood of receipt by
noteholders of amounts due them and to decrease the likelihood that
noteholders will experience losses. The spread account will be a part of
the trust and will be maintained as a segregated trust account in the name
of the indenture trustee. The indenture trustee will have a perfected
security interest therein and in all amounts deposited in or credited to
the spread account as well as to all Eligible Investments made with those
deposits and earnings. On the Closing Date, the spread account will be
funded by the issuer with an initial deposit in cash from the proceeds of
the sale of the notes. Thereafter, the spread account will be funded by the
deposit therein of amounts pursuant to clause (8) under "--Distributions"
above.
Amounts held from time to time in the spread account up to the Spread
Account Required Amount will continue to be held for the benefit of holders
of the notes and the insurer and may be invested in Eligible Investments.
Investment income on funds on deposit in the spread account will be
credited to the spread account. Any loss on investments will be charged to
the spread account.
The Spread Account Required Amount is an amount calculated pursuant
to a formula agreed to by the parties to the insurance agreement and each
of the rating agencies. The Spread Account Required Amount may be
calculated pursuant to any other formula as the parties to the insurance
agreement and each of the rating agencies may agree, and may include any
other provisions or contain any additional requirements as the parties to
the insurance agreement may agree, which each of the rating agencies may
require to maintain the ratings of the notes and to maintain the rating of
the transactions contemplated in the insurance agreement and the sale and
servicing agreement, without consideration of the insurance policy, at not
less than investment grade, as defined by the rating agencies. The Spread
Account Required Amount may increase or decrease over time, without the
consent of any of the noteholders, as a result of floors, caps and triggers
set forth in the insurance agreement. In addition, there can be no
assurance that the Spread Account Required Amount will be reached at any
given time. Consequently, noteholders should not rely on amounts on deposit
or to be deposited in the spread account in evaluating the likelihood that
the notes will be repaid.
WITHDRAWALS FROM THE SPREAD ACCOUNT
Amounts held from time to time in the spread account will be held for
the benefit of the noteholders and the insurer. On each Distribution Date,
the indenture trustee, based solely on the statement for that Distribution
Date received from the servicer, will withdraw funds from the spread
account to the extent that the sum of the amounts to be distributed as set
forth in clauses (1) through (7) under "--Distributions" above with respect
to that Distribution Date exceeds the amount of Available Funds available
with respect to that Distribution Date. The indenture trustee will apply
the amount of the withdrawal to make the distributions described under
"--Distributions" above. Funds will also be withdrawn from the spread
account to reimburse the insurer for any draws under the insurance policy
with respect to any Preference Amount.
If the amount on deposit in the spread account on any Distribution
Date (after giving effect to all deposits thereto or withdrawals therefrom
on that Distribution Date) is greater than the Spread Account Required
Amount, the indenture trustee will distribute any excess first to the
insurer, to the extent of any amounts owing to the insurer pursuant to the
insurance agreement or otherwise, and then to the holder of the residual
interest in the trust. Upon any distributions to the insurer or the holder
of the residual interest in the trust, the noteholders will have no further
rights in, or claims to, the distributed amounts.
On or after the occurrence of an event of default under the indenture
and the acceleration of the notes thereunder, and upon the written
direction of the insurer, all, or any portion of, amounts on deposit in the
spread account will be applied to pay amounts described under "--Early
Repayment".
None of the noteholders, the indenture trustee, the owner trustee,
the holder of the residual interest in the trust or the insurer will be
required to refund any amounts properly distributed to them, whether or not
there are sufficient funds on any subsequent Distribution Date to make full
distributions to the noteholders. The obligations of the insurer under the
insurance policy will not be diminished or otherwise affected by any
amounts distributed to the insurer as described in the preceding paragraph.
OVERCOLLATERALIZATION
The Pool Balance as of the Cut-Off Date of $698,718,463.75 will
exceed the initial principal amount of the notes by $6,987,463.75, or
approximately 1.0%. The Overcollateralization Amount is intended to enhance
the likelihood of receipt by noteholders of amounts due them and to
decrease the likelihood that noteholders will experience losses. Any
collections on the contracts relating to the Overcollateralization Amount
will be applied in accordance with the priorities set forth under
"--Distributions" above. Unless offset by losses on the contracts, the
application of those collections is expected to cause the aggregate
principal amount of the notes to decrease at a faster rate than the Pool
Balance decreases, thereby increasing the Overcollateralization Amount.
STATEMENTS TO NOTEHOLDERS
On each Distribution Date, the indenture trustee will either post on
its internet website at www.chase.com/SFA or otherwise include with each
distribution to a noteholder, a statement received from the servicer
setting forth for that Distribution Date the information described in the
accompanying prospectus under "Description of the Securities - Statements
to Securityholders" and the following information:
(1) the amount on deposit in the spread account on that
Distribution Date, before and after giving effect to
deposits thereto and withdrawals therefrom to be made in
respect of that Distribution Date;
(2) the amount of the withdrawal, if any, required to be made
from the spread account by the indenture trustee, as
described above under "--Withdrawals from the Spread
Account"; and
(3) the Spread Account Required Amount for that Distribution
Date.
REPORTS TO NOTEHOLDERS
Unless notes in definitive registered form are issued (which will
only occur under the limited circumstances described herein and in the
accompanying prospectus), the servicer will send unaudited monthly and
annual reports concerning the trust to the indenture trustee to be
delivered to Cede & Co. as the nominee of The Depository Trust
Company and the registered holder of the notes. See "--Statements to
Noteholders" above and "Description of the Securities--Statements to
Securityholders" in the accompanying prospectus. These reports will not
constitute financial statements prepared in accordance with generally
accepted accounting principles. DTC will supply these reports to
noteholders in accordance with its procedures. See "Description of the
Securities--Book-Entry Registration" in the accompanying prospectus. Since
owners of beneficial interests in the global notes will not be recognized
as noteholders, DTC will not forward monthly reports to those owners.
Copies of monthly reports may be obtained by owners of beneficial interests
in the global notes by a request in writing addressed to the indenture
trustee. None of the seller, the servicer or the insurer intends to send
any of its financial reports to noteholders.
SERVICING FEE
The servicer will be entitled to compensation for the performance of
its obligations under the sale and servicing agreement. The servicer will
be entitled to receive on each Distribution Date a servicing fee in an
amount equal to the product of (1) one-twelfth of 1.0% multiplied by (2)
the Pool Balance as of the end of the Collection Period preceding the
related Collection Period or, in the case of the first Distribution Date,
the Pool Balance as of the Cut-Off Date. As additional compensation, the
servicer or its designee will be entitled to retain all late payment
charges, extension fees and similar charges or fees paid in connection with
the contracts. The servicer will pay from its servicing compensation all
expenses incurred by it in connection with its servicing activities under
the sale and servicing agreement and will not be entitled to reimbursement
of its expenses except to the extent they constitute Liquidation Expenses
or expenses recoverable under an applicable insurance policy.
The sale and servicing agreement requires the servicer to use its
best efforts to collect all payments called for under the terms and
provisions of each of the contracts. The servicer, consistent with the
foregoing, will be permitted, in its discretion, to waive charges and grant
extensions as described under "Description of the Transfer and Servicing
Agreements--Waivers and Extensions" in the accompanying prospectus. The
servicer may not, with a few very limited exceptions, extend the maturity
date of a contract if there have been more than two credit-related
extensions granted on the contract in the immediately preceding twelve
months or if the sum of the terms of all extensions of the contract would
exceed six months. In addition, in no event may an extension be granted
beyond four months before the latest Final Scheduled Distribution Date for
the notes.
DEFAULT BY THE SERVICER; RIGHTS UPON DEFAULT BY THE SERVICER
The events which constitute a default by the servicer under the sale
and servicing agreement will be those events described in the accompanying
prospectus under "Description of the Transfer and Servicing
Agreements--Default by the Servicer" and any event of default under the
insurance agreement.
Upon the occurrence of a default by the servicer, unless an Insurer
Default shall have occurred and be continuing, only the insurer (and not
the indenture trustee or the noteholders) may terminate the servicer under
the sale and servicing agreement. In the event that the servicer is
terminated by the insurer, a successor servicer (other than the indenture
trustee) may be appointed by the insurer and will take over all the
responsibilities, duties and liabilities of the servicer under the sale and
servicing agreement. Until the insurer has appointed a successor servicer,
the indenture trustee will be the successor servicer. In the event that the
indenture trustee is unable to so act, and the insurer has not appointed a
successor servicer within 60 days, the indenture trustee may, with the
consent of the insurer, which consent will not be unreasonably withheld,
appoint, or petition a court of competent jurisdiction for the appointment
of, a successor acceptable to the insurer with a net worth of at least
$50,000,000 and whose regular business includes the servicing of automobile
and light-duty truck receivables.
Unless an Insurer Default shall have occurred and be continuing, the
insurer may, on behalf of the noteholders, waive any default by the
servicer in the performance of its obligations under the sale and servicing
agreement and its consequences. The rights of the noteholders to waive
defaults by the servicer under the sale and servicing agreement are as
described under "Description of the Transfer and Servicing
Agreements--Rights Upon Default by the Servicer" in the accompanying
prospectus.
Any successor servicer will succeed to all responsibilities, duties
and liabilities of the servicer under the sale and servicing agreement and
will be entitled to similar compensation arrangements; provided, however,
that the indenture trustee, as successor servicer, will not succeed to
AutoNation Financial Services' obligations to purchase contracts under any
circumstances. The indenture trustee as successor servicer will, however,
indemnify and hold harmless the issuer, the seller, the noteholders and the
insurer in the event of a failure by the indenture trustee in its capacity
as successor servicer to perform its obligations under the sale and
servicing agreement. The successor servicer will have the right to
terminate the services of any subservicer under the related subservicer
agreement in respect of the contracts which the successor servicer will be
assuming responsibilities as servicer, and any termination fees assessed
under the related subservicer agreement will be paid by the predecessor
servicer. In addition, upon the direction of the insurer, World Omni or any
successor may be terminated as the subservicer of the contracts and the
servicer will be required to transfer and deliver the contracts and any
related documents to the indenture trustee or another custodian designated
by the insurer following the occurrence of any of the following events:
(1) a default by the servicer under the sale and servicing
agreement;
(2) specified events of insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings and
actions by the subservicer indicating its insolvency, reorganization
pursuant to bankruptcy or similar proceedings or inability to pay its
obligations as they become due; or
(3) an event of default under the insurance agreement.
AMENDMENT
The sale and servicing agreement, the owner trust agreement and the
administration agreement may be amended by the parties thereto with the
consent of the insurer but without the consent of the noteholders to cure
any ambiguity, correct or supplement any provisions therein which may be
inconsistent with any other provisions therein, or make any other
provisions with respect to matters or questions arising thereunder which
are not inconsistent with the provisions of those agreements; provided that
any amendment will not materially and adversely affect the interest of any
noteholder. For a further discussion regarding amendments to the sale and
servicing agreement, the owner trust agreement and the administration
agreement, see "Description of the Transfer and Servicing Agreement -
Amendment" in the accompanying prospectus. Any amendment will be deemed not
to materially and adversely affect the interest of any noteholder if the
person requesting the amendment obtains (1) a letter from each rating
agency which has rated the notes to the effect that the amendment would not
result in a downgrading or withdrawal of the then current ratings assigned
to the notes by that rating agency without regard to the insurance policy
and (2) the consent of the insurer. The sale and servicing agreement, the
owner trust agreement and the administration agreement may also be amended
by the parties thereto with the consent of the insurer and, so long as the
notes are outstanding and an Insurer Default has occurred and is
continuing, the holders of notes evidencing not less than a majority of the
principal amount of the notes then outstanding, acting together as a single
class, for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of the sale and servicing
agreement, the owner trust agreement or the administration agreement or of
modifying, in any manner, the rights of the noteholders; provided, however,
that no amendment may, without the consent of the holders of all the
outstanding notes, (1) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, collections of payments on the related
contracts or distributions that are required to be made for the benefit of
the noteholders, (2) reduce the aforesaid percentage of the noteholders
which are required to consent to any amendment of the sale and servicing
agreement, the owner trust agreement or the administration agreement or
(3) result in a taxable event to any of the noteholders for federal income
tax purposes or result in the trust being an association or publicly traded
partnership taxable as a corporation for federal income tax purposes.
It is intended that the trust will not constitute a separate entity
for federal income tax purposes during the time that the seller holds the
entire equity interest in the trust; provided, however, that at any time
that equity interests in the trust are held by more than one holder, the
sale and servicing agreement, the owner trust agreement and the
administration agreement may be amended, as necessary and in accordance
with the preceding paragraph, to reflect the appropriate treatment of the
trust as a partnership for federal income tax purposes. See "Material
Federal Income Tax Consequences" below.
TERMINATION
The obligations of the servicer, the seller, the owner trustee and
the indenture trustee with respect to the related noteholders pursuant to
the owner trust agreement, the sale and servicing agreement or the
indenture will terminate as described under "Description of the Transfer
and Servicing Agreements - Termination" in the accompanying prospectus and
as set forth below.
The indenture trustee will give written notice of the termination of
the obligations of the servicer, the seller, the owner trustee or the
indenture trustee to each noteholder of record. The final distribution to
each noteholder will be made only upon surrender and cancellation of that
holder's notes at the office or agency of the indenture trustee specified
in the notice of termination. The indenture trustee will return, or cause
to be returned, any unclaimed funds to the trust.
Promptly following the date on which all principal of and interest on
the notes has been paid in full and the notes have been surrendered to the
indenture trustee, the indenture trustee will, if the insurer has paid any
amount in respect of the notes under the insurance policy that has not been
reimbursed to the insurer, deliver the surrendered notes to the insurer.
OPTIONAL PURCHASE
In order to avoid excessive administrative expenses, the servicer
will be permitted, at its option, to purchase the remaining contracts from
the trust on any Distribution Date as of which the Pool Balance has been
reduced to an amount less than or equal to 10% of the Cut-Off Date Pool
Balance. The price the servicer must pay to exercise the Optional Purchase
will be equal to the greater of (1) the sum of (A) the Pool Balance on the
date of purchase and (B) any accrued and unpaid interest on the contracts
and (2) the sum of (A) the aggregate unpaid principal amount of the notes,
(B) any accrued and unpaid interest thereon and (C) all amounts due to the
servicer, the owner trustee, the indenture trustee and the insurer under
the sale and servicing agreement, the owner trust agreement, the indenture,
the administration agreement and the insurance agreement. Any outstanding
notes will be redeemed concurrently with an Optional Purchase as described
under "Optional Redemption" above.
PAYMENT IN FULL OF NOTES
Upon the payment in full of all outstanding notes and the
satisfaction and discharge of the indenture, the owner trustee will succeed
to all the rights of the indenture trustee, and the seller will succeed to
all the rights of the noteholders, under the sale and servicing agreement,
except as otherwise provided therein.
DESCRIPTION OF THE ADMINISTRATION AGREEMENT
Pursuant to the administration agreement, AutoNation Financial
Services will serve as the administrator and will agree, to the extent
provided in the administration agreement, to provide the notices and to
perform other administrative obligations required by the indenture. As
compensation for the performance of the administrator's obligations under
the administration agreement and as reimbursement for its expenses related
thereto, the administrator will be entitled to an annual administration
fee. The administration fee will be paid by the servicer.
DESCRIPTION OF THE INSURANCE POLICY
The following information has been supplied by MBIA Insurance
Corporation, the insurer, for inclusion in this prospectus supplement. The
insurer does not accept any responsibility for the accuracy or completeness
of this prospectus supplement or any information or disclosure contained
herein, or omitted herefrom, other than with respect to the accuracy of the
information regarding the insurance policy and the insurer set forth under
the headings "Description of the Insurance Policy" and "Description of the
Insurer" herein. Additionally, the insurer makes no representation
regarding the notes or the advisability of investing in the notes.
The insurer, in consideration of the payment of a premium and subject
to the terms of the insurance policy, thereby unconditionally and
irrevocably guarantees to any noteholder that an amount equal to each full
and complete Insured Payment will be received from the insurer by the
indenture trustee or its successors, as indenture trustee for the
noteholders, on behalf of the noteholders, for distribution by the
indenture trustee to each noteholder of that noteholder's proportionate
share of the Insured Payment.
The insurer's obligations under the insurance policy, with respect to
a particular Insured Payment, will be discharged to the extent funds equal
to the applicable Insured Payment are received by the indenture trustee,
whether or not those funds are properly applied by the indenture trustee.
Insured Payments will be made only at the time set forth in the insurance
policy, and no accelerated Insured Payments will be made regardless of any
acceleration of the notes, unless the acceleration is at the sole option of
the insurer.
Notwithstanding the foregoing paragraph, the insurance policy does
not cover shortfalls, if any, attributable to the liability of the trust or
the indenture trustee for withholding taxes, if any (including interest and
penalties in respect of any liability for withholding taxes).
The insurer will pay any Insured Payment that is a Preference Amount
on the business day following receipt on a business day by the insurer's
fiscal agent of the following:
o a certified copy of the order requiring the return of a
preference payment;
o an opinion of counsel satisfactory to the insurer that the order
is final and not subject to appeal;
o an assignment in a form that is reasonably required by the
insurer, irrevocably assigning to the insurer all rights and
claims of the noteholder relating to or arising under the notes
against the debtor which made the preference payment or otherwise
with respect to the preference payment; and
o appropriate instruments to effect the appointment of the insurer
as agent for the noteholder in any legal proceeding related to
the preference payment, which instruments are in a form
satisfactory to the insurer;
provided that if these documents are received after 12:00 noon, New York
time, on that business day, they will be deemed to be received on the
following business day. Payments by the insurer will be disbursed to the
receiver or the trustee in bankruptcy named in the final order of the court
exercising jurisdiction on behalf of the noteholder and not to any
noteholder directly unless the noteholder has returned principal or
interest paid on the notes to the receiver or trustee in bankruptcy, in
which case that payment will be disbursed to the noteholder.
The insurer will pay any other amount payable under the insurance
policy no later than 12:00 noon, New York time, on the later of the
Distribution Date on which the related Deficiency Amount is due or the
second business day following receipt in New York, New York on a business
day by State Street Bank and Trust Company, N.A., as fiscal agent for the
insurer or any successor fiscal agent appointed by the insurer of a notice
from the indenture trustee specifying the Insured Payment which is due and
owing on the applicable Distribution Date; provided, that if the notice is
received after 12:00 noon, New York time, on that business day, it will be
deemed to be received on the following business day. If any notice received
by the insurer's fiscal agent is not in proper form or is otherwise
insufficient for the purpose of making a claim under the insurance policy,
it will be deemed not to have been received by the insurer's fiscal agent
for the purposes of this paragraph, and the insurer or the fiscal agent, as
the case may be, will promptly so advise the indenture trustee and the
indenture trustee may submit an amended notice.
Insured Payments due under the insurance policy, unless otherwise
stated therein, will be disbursed by the insurer's fiscal agent to the
indenture trustee, on behalf of the noteholders, by wire transfer of
immediately available funds in the amount of the Insured Payment less, in
respect of Insured Payments related to Preference Amounts, any amount held
by the indenture trustee for the payment of the Insured Payment and legally
available therefor.
The fiscal agent is the agent of the insurer only and the fiscal
agent will in no event be liable to noteholders for any acts of the fiscal
agent or any failure of the insurer to deposit or cause to be deposited
sufficient funds to make payments due under the insurance policy.
Subject to the terms of the sale and servicing agreement, the insurer
will be subrogated to the rights of each noteholder to receive payments
under the notes to the extent of any payment by the insurer under the
insurance policy.
Capitalized terms used in the insurance policy and not otherwise
defined in the insurance policy shall have the meanings set forth in the
sale and servicing agreement as of the date of execution of the insurance
policy, without giving effect to any subsequent amendment or modification
to the sale and servicing agreement unless such amendment or modification
has been approved in writing by the insurer.
The insurance policy is not cancelable for any reason. The premium on
the insurance policy is not refundable for any reason including payment, or
provision being made for payment, prior to the maturity of the notes.
The insurance policy is being issued under and pursuant to, and will
be construed under, the laws of the State of New York, without giving
effect to the conflict of laws principles thereof.
THE INSURANCE PROVIDED BY THE INSURANCE POLICY IS NOT COVERED BY THE
PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE
NEW YORK INSURANCE LAW.
A form of the insurance policy is attached to this prospectus
supplement as exhibit A.
DESCRIPTION OF THE INSURER
THE INSURER
MBIA Insurance Corporation, the insurer, is the principal operating
subsidiary of MBIA Inc., a New York Stock Exchange listed company. MBIA
Inc. is not obligated to pay the debts of or claims against the insurer.
The insurer is domiciled in the State of New York and licensed to do
business in and is subject to regulation under the laws of all 50 states,
the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth
of the Northern Mariana Islands, the Virgin Islands of the United States
and the Territory of Guam. The insurer has two European branches, one in
the Republic of France and the other in the Kingdom of Spain. New York has
laws prescribing minimum capital requirements, limiting classes and
concentrations of investments and requiring the approval of policy rates
and forms. State laws also regulate the amount of both the aggregate and
individual risks that may be insured, the payment of dividends by the
insurer, changes in control and transactions among affiliates.
Additionally, the insurer is required to maintain contingency reserves on
its liabilities in specified amounts and for specified periods of time.
FINANCIAL INFORMATION ABOUT THE INSURER
The consolidated financial statements of the insurer, a wholly owned
subsidiary of MBIA Inc., and its subsidiaries as of December 31, 1999 and
December 31, 1998 and for each of the three years in the period ended
December 31, 1999, prepared in accordance with generally accepted
accounting principles, included in the Annual Report on Form 10-K of MBIA
Inc. for the year ended December 31, 1999 and the consolidated financial
statements of the insurer and its subsidiaries as of March 31, 2000 and for
the three month periods ended March 31, 2000 and March 31, 1999 included in
the Quarterly Report on Form 10-Q of MBIA Inc. for the period ended March
31, 2000, are hereby incorporated by reference into this prospectus
supplement and shall be deemed to be a part hereof. Any statement contained
in a document incorporated by reference herein shall be modified or
superseded for purposes of this prospectus supplement to the extent that a
statement contained herein or in any other subsequently filed document
which also is incorporated by reference herein modifies or supersedes that
statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this
prospectus supplement.
All financial statements of the insurer and its subsidiaries included
in documents filed by MBIA Inc. pursuant to Section 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended, subsequent to the
date of this prospectus supplement and prior to the termination of the
offering of the notes shall be deemed to be incorporated by reference into
this prospectus supplement and to be a part hereof from the respective
dates of filing those documents.
The tables below present selected financial information of the
insurer determined in accordance with statutory accounting practices
prescribed or permitted by insurance regulatory authorities and generally
accepted accounting principles:
Statutory Accounting Generally Accepted
Practices Accounting Principles
--------------------- ---------------------
December 31,March 31, December 31,March 31,
1999 2000 1999 2000
---------- --------- ----------- ---------
(Audited) (Unaudited) (Audited) (Unaudited)
(In Millions) (In Millions)
Admitted Assets... $ 7,045 $ 7,188 Assets.......... $ 7,446 $ 7,675
Liabilities....... 4,632 4,770 Liabilities..... 3,218 3,315
Capital and Surplus 2,413 2,418 Shareholder's Equity 4,228 4,360
WHERE YOU CAN OBTAIN ADDITIONAL INFORMATION ABOUT THE INSURER
Copies of the financial statements of the insurer incorporated by
reference herein and copies of the insurer's 1999 year-end audited
financial statements prepared in accordance with statutory accounting
practices are available, without charge, from the insurer. The address of
the insurer is 113 King Street, Armonk, New York 10504. The telephone
number of the insurer is (914) 273-4545.
FINANCIAL STRENGTH RATINGS OF THE INSURER
Moody's Investors Service rates the financial strength of the insurer
"Aaa."
Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc., rates the financial strength of the insurer "AAA."
Fitch, Inc. rates the financial strength of the insurer "AAA."
Each rating of the insurer should be evaluated independently. The
ratings reflect each respective rating agency's current assessment of the
creditworthiness of the insurer and its ability to pay claims on its
policies of insurance. Any further explanation as to the significance of
the above ratings may be obtained only from the applicable rating agency.
The above ratings are not recommendations to buy, sell or hold the
notes, and the ratings may be subject to revision or withdrawal at any time
by the rating agencies. Any downward revision or withdrawal of any of the
above ratings may have an adverse effect on the market price of the notes.
The insurer does not guaranty the market price of the notes nor does it
guaranty that the ratings on the notes will not be revised or withdrawn.
LEGAL INVESTMENT
The class A-1 notes will be eligible securities for purchase by money
market funds under paragraph (a)(10) of Rule 2a-7 under the Investment
Company Act of 1940, as amended.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
Weil, Gotshal & Manges LLP has delivered its opinion, under current
law and subject to the qualifications set forth therein, that upon the
issuance of the notes, although no authority exists directly relating to
the proper characterization of securities similar to the notes or to an
entity similar to the trust, for federal income tax purposes, (1) the notes
will be characterized as debt and (2) the trust will not be characterized
as an association or a publicly traded partnership taxable as a
corporation. Each noteholder, by the acceptance of a note, will agree to
treat the notes as indebtedness for federal, state and local income, single
business and franchise tax purposes. See "Material Federal Income Tax
Consequences" in the accompanying prospectus for additional information
concerning the application of federal income tax laws to the trust and the
notes.
ERISA CONSIDERATIONS
Subject to the considerations set forth below and under "ERISA
Considerations" in the prospectus, the notes may be purchased by an
employee benefit plan or an individual retirement account subject to the
Employee Retirement Income Security Act of 1974, as amended, which is
generally referred to as "ERISA" or Section 4975 of the Internal Revenue
Code of 1986, as amended. A fiduciary of a benefit plan must determine that
the purchase of a note is consistent with its fiduciary duties under ERISA
and does not result in a nonexempt prohibited transaction as defined in
Section 406 of ERISA or Section 4975 of the Internal Revenue Code. Section
406 of ERISA prohibits parties in interest or disqualified persons with
respect to a benefit plan from engaging in transactions (including loans)
involving a benefit plan and its assets unless a statutory or
administrative exemption applies to the transaction. Section 4975 of the
Internal Revenue Code imposes excise taxes (or, in some cases, a civil
penalty may be assessed pursuant to section 502(i) of ERISA) on parties in
interest which engage in non-exempt prohibited transactions. In addition,
Title I of ERISA also requires fiduciaries of a benefit plan subject to
ERISA to make investments that are prudent, diversified and in accordance
with the governing plan documents.
The Plan Asset Regulation provides that, as a general rule, the
underlying assets and properties of corporations, partnerships, trusts and
some other entities in which a benefit plan purchases an "equity interest"
will be deemed for purposes of ERISA to be assets of the investing benefit
plan unless exceptions apply. The Plan Asset Regulation defines an "equity
interest" as any interest in an entity other than an instrument that is
treated as indebtedness under applicable local law and which has no
substantial equity features. Although there is very little authority
directly on point and there can be no assurances in this regard, the seller
believes that the notes offered hereby should not be treated as "equity
interests" for purposes of the Plan Asset Regulation. Specifically, the
notes (a) are expected to be treated as indebtedness under local law and
will, in the opinion of Weil, Gotshal & Manges LLP, be treated as debt,
rather than equity, for federal tax purposes (see "Material Federal Income
Tax Consequences" herein) and (b) should not be deemed to have any
"substantial equity features." Those conclusions are based, in part, upon
the traditional debt features of the notes, including the reasonable
expectation of purchasers of the notes that the notes will be repaid when
due, as well as the absence of conversion rights, warrants and other
typical equity features. In the event that the insurer's obligations under
the insurance policy cease or otherwise become unavailable, the notes might
not be treated as debt for purposes of ERISA. Accordingly, on the date
hereof, and thereafter, unless the insurer's obligations under the
insurance policy cease or otherwise become unavailable, the acquisition of
the notes by benefit plan investors should not cause the assets of the
trust to be treated as Plan Assets for purposes of Title I of ERISA.
However, the notes may not be purchased with the assets of a benefit
plan if the seller, the servicer, the indenture trustee, the owner trustee
or any of their affiliates (a) has investment or administrative discretion
with respect to the benefit plan assets; (b) has authority or
responsibility to give, or regularly gives, investment advice with respect
to the benefit plan assets, for a fee and pursuant to an agreement or
understanding that the advice (1) will serve as a primary basis for
investment decisions with respect to the benefit plan assets and (2) will
be based on the particular investment needs for the benefit plan; or (c) is
an employer maintaining or contributing to the benefit plan.
The issuer, the servicer or affiliates thereof might be considered or
might become parties in interest with respect to a benefit plan. In either
case, the acquisition or holding of notes by or on behalf of a benefit plan
could give rise to an indirect prohibited transaction within the meaning of
ERISA and the Internal Revenue Code, unless it is subject to one or more
exemptions such as Prohibited Transaction Class Exemption (or PTCE) 84-14,
which exempts transactions effected on behalf of a benefit plan by a
"qualified professional asset manager", PTCE 90-1, which exempts
transactions involving insurance company pooled separate accounts,
PTCE-91-38, which exempts transactions involving bank collective investment
funds, PTCE 95-60, which exempts transactions involving insurance company
general accounts, or PTCE 96-23, which exempts transactions effected on
behalf of a benefit plan by "in-house asset managers."
Each purchaser or transferee of a note that is a benefit plan will be
deemed to have represented that the relevant conditions for exemptive
relief under at least one of the foregoing exemptions (or other applicable
exemption providing substantially similar relief) have been satisfied.
Each benefit plan fiduciary should consult with its attorneys and
financial advisors as to the propriety of an investment in the notes in
light of the circumstances of the particular benefit plan and the
restrictions of ERISA and Section 4975 of the Internal Revenue Code.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting
agreement between the seller and the underwriters named below, the seller
has agreed to cause the trust to sell to each of the underwriters, and each
of the underwriters has agreed to purchase, the principal amount of the
notes set forth opposite its name in the table below:
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF AMOUNT OF AMOUNT OF
CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4
UNDERWRITERS NOTES NOTES NOTES NOTES
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
First Union Securities, Inc.. $ 73,784,480 $ 99,916,960 $ 86,389,600 $ 44,270,600
Banc of America Securities LLC $ 38,569,160 $ 52,229,320 $ 45,158,200 $ 23,141,450
Chase Securities Inc. ....... $ 38,569,160 $ 52,229,320 $ 45,158,200 $ 23,141,450
Credit Suisse First Boston
Corporation................ $ 16,769,200 $ 22,708,400 $ 19,634,000 $ 10,061,500
Total.................. $167,692,000 $227,084,000 $196,340,000 $100,615,000
============ ============ ============ ============
The price to the public, underwriters' discounts and commissions, the
concessions that the underwriters may allow to dealers, and the discounts
that the dealers may reallow to other dealers, each expressed as a
percentage of the principal amount of each class of notes, will be as
follows:
UNDERWRITING DISCOUNTS
PRICE TO DISCOUNTS AND CONCESSIONS BETWEEN
PUBLIC COMMISSIONS(1) TO DEALERS DEALERS
----------- ------------- ------------- -----------
Class A-1 Notes.......... 100.000001% 0.1250% 0.0750% 0.0500%
Class A-2 Notes.......... 99.992096% 0.2000% 0.1200% 0.0750%
Class A-3 Notes.......... 99.982825% 0.2200% 0.1320% 0.1000%
Class A-4 Notes.......... 99.987990% 0.2500% 0.1500% 0.1000%
(1)Includes all items considered by the National Association of Securities
Dealers to be underwriting compensation for purposes of the NASD's Rules
of Fair Practice.
After the offering is completed, the seller will receive the
proceeds, after deduction of the underwriting and other expenses, listed
below:
</TABLE>
<TABLE>
<CAPTION>
UNDERWRITING DISCOUNTS
PROCEEDS TO SELLER AND COMMISSIONS(1)
--------------------------------- --------------------
<S> <C> <C> <C>
Class A-1 Notes................ $167,482,387 (99.87500$209,615 $209,615 (0.1250%)
Class A-2 Notes................ $226,611,883 (99.79209$454,168 454,168 (0.2000%)
Class A-3 Notes................ $195,874,331 (99.76282$431,948 431,948 (0.2200%)
Class A-4 Notes................ $100,351,379 (99.73799$251,538 251,538 (0.2500%)
</TABLE>
(1) Includes all items considered by the National Association of Securities
Dealers to be underwriting compensation for purposes of the NASD's Rules
of Fair Practice.
Additional offering expenses payable by the seller are estimated to
be $500,000. After the public offering, the public offering price and other
selling terms may be changed by the underwriters.
The underwriters may engage in over-allotment, stabilizing
transactions and syndicate covering transactions with respect to the notes.
Over-allotment transactions involve syndicate sales in excess of the
offering size, which create a syndicate short position. Stabilizing
transactions permit bids to purchase the notes so long as the stabilizing
bids do not exceed a specified maximum. Syndicate covering transactions
involve purchases of the notes in the open market after the distribution
has been completed in order to cover syndicate short positions. These
over-allotment transactions, stabilizing transactions and syndicate
covering transactions may cause the price of the notes to be higher than it
would otherwise be in the absence of these transactions. Neither the seller
nor the underwriters represent that the underwriters will engage in any of
these transactions or that these transactions, once commenced, will not be
discontinued without notice at any time.
In the ordinary course of business, each underwriter and its
affiliates may have engaged and may engage in investment banking and/or
commercial banking transactions with the seller, its affiliates and the
trust. In addition, each underwriter may from time to time take positions
in the notes. The seller and AutoNation Financial Services have agreed to
indemnify the underwriters against specified liabilities, including
liabilities under the Securities Act of 1933, as amended, or to contribute
to payments the underwriters may be required to make in respect thereof.
LEGAL MATTERS
Relevant legal matters with respect to the notes and with respect to
the federal income tax matters discussed under "Material Federal Income Tax
Consequences" in the accompanying prospectus will be passed upon for the
seller by Weil, Gotshal & Manges LLP, New York, New York. In addition,
relevant matters of Florida law will be passed upon for the trust and the
seller by Tripp Scott, P.A., Fort Lauderdale, Florida. Relevant legal
matters with respect to the notes will be passed upon for the underwriters
by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York. Relevant
legal matters relating to the insurer will be passed upon for the insurer
by Kutak Rock LLP, Omaha, Nebraska.
EXPERTS
The consolidated balance sheets of MBIA Insurance Corporation and its
subsidiaries as of December 31, 1999 and 1998 and the related consolidated
statements of income, changes in shareholder's equity, and cash flows for
each of the three years in the period ended December 31, 1999, incorporated
by reference in this prospectus supplement, have been incorporated herein
in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of that firm as experts in accounting
and auditing.
GLOSSARY
"AMOUNT FINANCED" means, with respect to a contract, the aggregate
amount advanced by the originator under the contract toward the purchase
price of the related financed vehicle and related costs, including amounts
advanced in respect of accessories, extended service or warranty contracts
and other items customarily financed as part of retail automobile
installment sales contracts, excluding any collision and/or comprehensive
insurance premiums.
"AVAILABLE FUNDS" means, with respect to a Distribution Date and the
related Collection Period, the following:
(1) amounts received with respect to the contracts in the
related Collection Period representing monthly principal and interest
payments;
(2) full and partial prepayments by the related obligor;
(3) any Net Liquidation Proceeds;
(4) any Net Insurance Proceeds;
(5) any amounts deposited by AutoNation Financial Services or
the seller, as applicable, in the collection account to purchase or
repurchase contracts because of material defects in documents related
to the contracts or breaches of representations or warranties
regarding the contracts made by AutoNation Financial Services in the
receivables purchase agreement or by the seller in the sale and
servicing agreement, as applicable, that materially and adversely
affect the interests of the noteholders or the insurer;
(6) any amounts deposited by the servicer in the collection
account to purchase contracts as a remedy for breach of the
servicer's representations, warranties and covenants relating to the
servicing of the contracts;
(7) any amounts deposited by the servicer in the collection
account pursuant to an Optional Purchase; and
(8) income from Eligible Investments of funds on deposit in the
Trust Accounts.
"CLOSING DATE" means August 10, 2000.
"COLLECTION PERIOD" means, with respect to any Distribution Date, the
calendar month immediately preceding the calendar month in which that
Distribution Date occurs (or, in the case of the first Collection Period,
the period of time from but excluding the Cut-Off Date through the last day
of the calendar month immediately preceding the month in which the first
Distribution Date occurs).
"CUT-OFF DATE" means June 30, 2000.
"DEFAULTED CONTRACT" means, with respect to any Collection Period, a
contract (1) which, at the end of that Collection Period, is deemed
uncollectible by the servicer in accordance with its customary procedures,
(2) in respect of which all amounts more than one hundred and twenty (120)
days past due represent in the aggregate $40 or more, (3) in respect of
which the related financed vehicle has been repossessed and liquidated or
(4) in respect of which the servicer has repossessed and held the related
financed vehicle in its repossession inventory for 91 days or more,
whichever occurs first.
"DEFICIENCY AMOUNT" means, for any Distribution Date, the sum of (a)
the excess, if any, of (1) the Note Interest Distributable Amount with
respect to all classes of notes for that Distribution Date over (2) the sum
of (A) the Available Funds for that Distribution Date (after giving effect
to the distributions described in clauses (1) through (3) under
"Description of the Transfer and Servicing Agreements - Distributions" for
that Distribution Date) and (B) the amount to be on deposit in the spread
account for that Distribution Date (after giving effect to any withdrawals
to pay amounts described in clauses (1) through (3) under "Description of
the Transfer and Servicing Agreements - Distributions" for that
Distribution Date) and (b) the Guaranteed Note Principal Amount for that
Distribution Date.
"DISTRIBUTION DATE" means the 15th day of each month (or if that day
is not a business day (i.e., a Saturday, Sunday, a day on which the insurer
is closed or a day on which banking institutions in New York, New York or
in the city in which the indenture trustee's corporate trust office or the
owner trustee's corporate trust office is located are authorized or
obligated by law to be closed), on the next succeeding business day).
"ELIGIBLE INVESTMENTS" means any one or more of the following
obligations or securities, all of which will be denominated in United
States dollars:
(1) direct obligations of, and obligations fully guaranteed as
to timely payment of principal and interest by, the United States of
America or any agency or instrumentality of the United States of
America the obligations of which are backed by the full faith and
credit of the United States of America and, to the extent, at the
time of investment, acceptable to the insurer and each rating agency
for securities having a rating equivalent to the rating of the notes
at the Closing Date, the direct obligations of, or obligations fully
guaranteed by, the Federal Home Loan Mortgage Corporation and the
Federal National Mortgage Association;
(2) demand and time deposits in, certificates of deposit of,
banker's acceptances issued by, or federal funds sold by any
depository institution or trust company (including the indenture
trustee or the owner trustee) incorporated under the laws of the
United States of America or any state and subject to supervision and
examination by federal and/or state banking authorities, so long as
at the time of the investment or contractual commitment providing for
the investment the short-term, unsecured debt obligations of that
depository institution or trust company have credit ratings from
Standard & Poor's at least equal to "A-1+" and from Moody's at least
equal to "P-1"; provided that any demand and time deposits will be
fully insured by the Federal Deposit Insurance Corporation and any
certificates of deposit must be secured at all times by collateral
described in clause (1) above, the collateral must be held by a third
party and the indenture trustee must have a perfected first priority
security interest in the collateral;
(3) repurchase obligations with a term not to exceed 30 days
and with respect to (a) any security described in clause (1) above or
(b) any other security issued or guaranteed as to timely payment of
principal and interest by an agency or instrumentality of the United
States of America, in either case entered into with any depository
institution or trust company (including the indenture trustee and the
owner trustee), acting as principal, described in clause (2) above;
provided, however, that collateral transferred pursuant to a
repurchase obligation must be of the type described in clause (1)
above and must (x) be marked-to-market weekly at current market price
plus accrued interest, (y) pursuant to that valuation, be equal at
all times to 105% of the cash transferred by the indenture trustee in
exchange for the collateral and (z) be delivered to the indenture
trustee or, if the indenture trustee is supplying the collateral, an
agent for the indenture trustee, in such a manner as to accomplish
perfection of a security interest in the collateral by possession of
certificated securities;
(4) commercial paper having the highest rating by Standard &
Poor's and Moody's at the time of the investment;
(5) investments in money market funds or money market mutual
funds registered under the Investment Company Act of 1940, as
amended, whose shares are registered under the Securities Act of
1933, having a rating from Standard & Poor's and Moody's in the
highest investment category granted thereby, including funds for
which the indenture trustee, the owner trustee or any of their
respective affiliates is investment manager or advisor; and
(6) other obligations or securities acceptable to the insurer,
as evidenced by a letter from the insurer to the indenture trustee
(which acceptability may be revoked at any time by the insurer).
"FINAL SCHEDULED DISTRIBUTION DATE" means the date on or by which the
full outstanding principal amount of each class of notes will be repaid,
which (1) in the case of the class A-1 notes, will be August 15, 2001, (2)
in the case of the class A-2 notes, will be March 17, 2003, (3) in the case
of the class A-3 notes, will be May 17, 2004 and (4) in the case of the
class A-4 notes, will be February 15, 2007.
"GUARANTEED NOTE PRINCIPAL AMOUNT" means, for any Distribution Date,
the lesser of (a) the excess, if any, of (1) the Note Principal
Distributable Amount for that Distribution Date over (2) the sum of (A) the
Available Funds for that Distribution Date (after giving effect to the
distributions described in clauses (1) through (4) under "Description of
the Transfer and Servicing Agreements - Distributions" for that
Distribution Date) and (B) the amount to be on deposit in the spread
account for that Distribution Date (after giving effect to any withdrawals
to pay amounts described in clauses (1) through (4) under "Description of
the Transfer and Servicing Agreements - Distributions" for that
Distribution Date) and (b) the excess, if any, of (1) the outstanding
principal amount of the notes for that Distribution Date (after giving
effect to all payments of principal of the notes on that Distribution Date
other than from an Insured Payment) over (2) the sum of (A) the Pool
Balance as of the last day of the preceding Collection Period and (B) the
amount to be on deposit in the spread account (after giving effect to any
withdrawals to pay amounts described in clauses (1) through (6) under
"Description of the Transfer and Servicing Agreements - Distributions" for
that Distribution Date); provided, however, on the Final Scheduled
Distribution Date for a class of notes, the Guaranteed Note Principal
Amount shall be at least equal to the outstanding principal amount of that
class of notes on that Final Scheduled Distribution Date (after giving
effect to all payments of principal of the notes on that Final Scheduled
Distribution Date other than from an Insured Payment).
"INSURED PAYMENT" means (a) as of any Distribution Date, any
Deficiency Amount and (b) any Preference Amount.
"INSURER DEFAULT" means the occurrence and continuance of any of the
following events:
(1) the insurer shall have failed to make a payment required to
be made under the insurance policy in accordance with its terms;
(2) the insurer shall have (a) filed a petition or commenced
any case or proceeding in respect of the insurer under any provision
or chapter of the United States Bankruptcy Code or similar state
laws, (b) made a general assignment for the benefit of its creditors
or (c) had an order for relief entered against it under the United
States Bankruptcy Code or similar state laws which is final and
nonappealable; or
(3) a court of competent jurisdiction, the New York Department
of Insurance or other competent regulatory authority shall have
entered a final and nonappealable order, judgment or decree (a)
appointing a custodian, trustee, agent or receiver for the insurer or
for all or any material portion of its property or (b) authorizing
the taking of possession by a custodian, trustee, agent or receiver
of the insurer (or the taking of possession of all or any material
portion of the property of the insurer).
"INTEREST ACCRUAL PERIOD" means, with respect to any Distribution
Date, the period from and including the previous Distribution Date or, in
the case of the first Distribution Date, from and including the Closing
Date, to but excluding that Distribution Date.
"LIQUIDATION EXPENSES" means the reasonable out-of-pocket expenses
(not including overhead expenses) incurred by the servicer in connection
with the collection and realization of the full amounts due under any
Defaulted Contract and the repossession and sale of any property acquired
in respect thereof which are not recoverable under any type of motor
vehicle insurance policy.
"MONTHLY SCHEDULED PAYMENT" means, with respect to any contract in
any given month, the amount of the scheduled payment of principal and
interest on the contract for that month, exclusive of any late payment
charges or extension fees.
"NET INSURANCE PROCEEDS" means the proceeds paid by any insurer under
a comprehensive and collision insurance policy related to a contract (other
than funds used for the repair of the related financed vehicle or proceeds
released to the related obligor in excess of the principal balance of the
contract, and all accrued interest thereon and all other amounts due
thereunder), after reimbursement to the servicer of expenses recoverable
under that insurance policy.
"NET LIQUIDATION PROCEEDS" means, with respect to any contract that
becomes a Defaulted Contract, the amount received by the servicer in
respect of that contract during or after the Collection Period in which
that contract becomes a Defaulted Contract (excluding Liquidation Expenses
with respect to that contract).
"NOTE INTEREST CARRYOVER SHORTFALL" means, with respect to any
Distribution Date and a class of notes, the sum of (1) the excess, if any,
of the Note Interest Distributable Amount for that class for the
immediately preceding Distribution Date over the amount in respect of
interest that is actually deposited in the note distribution account with
respect to that class on the preceding Distribution Date and (2) to the
extent permitted by applicable law, interest on the amount of interest due
but not paid to noteholders of that class on the preceding Distribution
Date at the related interest rate for the related Interest Accrual Period;
provided, however, that the Note Interest Carryover Shortfall for the first
Distribution Date shall be zero.
"NOTE INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date and a class of notes, the sum of (1) an amount equal to
the interest accrued during the related Interest Accrual Period at the
related interest rate for that class of notes on the outstanding principal
amount of that class of notes on the immediately preceding Distribution
Date (or, in the case of the first Distribution Date, on the original
principal amount of the class of notes) and (2) the Note Interest Carryover
Shortfall for that class of notes for that Distribution Date.
"NOTE PRINCIPAL CARRYOVER SHORTFALL" means, as of the close of
business of any Distribution Date, the excess of the Note Principal
Distributable Amount for that Distribution Date over the amount in respect
of principal that is actually paid from the note distribution account on
that Distribution Date.
"NOTE PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the sum of (1) the Principal Distributable Amount for
that Distribution Date and (2) any outstanding Note Principal Carryover
Shortfall for the immediately preceding Distribution Date; provided that
the Note Principal Distributable Amount will not exceed the aggregate
outstanding principal amount of the notes. Notwithstanding the foregoing,
the Note Principal Distributable Amount on the Final Scheduled Distribution
Date for each class of notes will not be less than the amount that is
necessary to reduce the outstanding principal amount of the related class
of notes to zero.
"OPTIONAL PURCHASE" means the purchase by the servicer, at its
option, of the remaining contracts from the trust on any Distribution Date
as of which the Pool Balance has been reduced to an amount less than or
equal to 10% of the original Pool Balance.
"OVERCOLLATERALIZATION AMOUNT" means the amount by which the Pool
Balance as of the Cut-Off Date will exceed the initial principal amount of
the notes.
"PARTIES IN INTEREST" means parties in interest or disqualified
persons with respect to an employee benefit plan or an individual
retirement account subject to the Employee Retirement Income Security Act
of 1974, as amended.
"PAYMENT DEFAULT" means either (1) a default for five days or more in
the payment of any interest on any note or (2) a default in the payment of
any principal on the applicable Final Scheduled Distribution Date for a
class of notes.
"PLAN ASSET REGULATION" means the United States Department of Labor
regulation (29 CFR Section 2510.3- 101) concerning the definition of what
constitutes the assets of an employee benefit plan or an individual
retirement account subject to the Employee Retirement Income Security Act
of 1974, as amended.
"POOL BALANCE" means, as of any date of determination, the aggregate
principal balance of the contracts other than Defaulted Contracts and
Purchased Contracts, which will be 698,718,463.75 as of the Cut-Off Date.
"PREFERENCE AMOUNT" means any amount previously distributed to a
noteholder on the notes that is recoverable and sought to be recovered as a
voidable preference by a trustee in bankruptcy pursuant to the United
States Bankruptcy Code (11 U.S.C.), as amended from time to time, in
accordance with a final nonappealable order of a court having competent
jurisdiction.
"PRINCIPAL BALANCE" means, with respect to a contract, as of any date
of determination, the Amount Financed under the terms of the contract minus
that portion of all Monthly Scheduled Payments and any full or partial
prepayments in respect of the contract received on or prior to the end of
the most recently ended Collection Period and allocable to principal as
determined by the servicer. For purposes of this definition, allocations
between interest and principal of the Monthly Scheduled Payment for each
contract by the servicer shall be made in accordance with the terms of each
contract.
"PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the amount equal to the sum of the following amounts
with respect to the related Collection Period:
(1) all collections received on contracts (other than Defaulted
Contracts and Purchased Contracts) allocable to principal as
determined by the servicer, including full and partial principal
prepayments;
(2) the Principal Balance of all contracts (other than
Purchased Contracts) that became Defaulted Contracts during the
related Collection Period; and
(3) the Principal Balance as of the date of purchase of all
contracts that became Purchased Contracts as of the immediately
preceding date of the servicer's report.
"PURCHASE AMOUNT" means, with respect to a Purchased Contract, the
Principal Balance of the contract as of the date of purchase or repurchase
of the contract by AutoNation Financial Services or the seller, plus
accrued and unpaid interest thereon to the date of purchase or repurchase
at the applicable APR.
"PURCHASED CONTRACT" means a contract that (1) has been repurchased
by AutoNation Financial Services or the seller because of material defects
in documents related to the contract or breaches of representations and
warranties made by the seller in the sale and servicing agreement regarding
the contract or by AutoNation Financial Services in the receivables
purchase agreement that materially and adversely affect the interests of
the issuer, the indenture trustee, the owner trustee, the noteholders or
the insurer, (2) has been purchased by the servicer because of breaches by
the servicer of its servicing covenants or (3) has been purchased by the
servicer in the event of an Optional Purchase.
"SPREAD ACCOUNT REQUIRED AMOUNT" means an amount calculated pursuant
to a formula agreed to by the parties to the insurance agreement and each
of the rating agencies.
"TRUST BANKRUPTCY EVENT" means events of bankruptcy, insolvency,
receivership or liquidation with respect to the trust specified in the
indenture.
"TRUST PROPERTY" means the property of the trust, which consists of
the following:
(1) the contracts, all of which will have been purchased from the
seller and are secured by financed vehicles;
(2) all documents relating to the contracts, including the
servicing records in hard or electronic form;
(3) collections and all other amounts due under the contracts
after the Cut-off Date;
(4) liens on the financed vehicles and the right to receive
proceeds from claims on any related insurance policies covering the
financed vehicles or the related obligors;
(5) all amounts on deposit in the collection account, the payment
account, the note distribution account and the spread account,
including the principal amount of all Eligible Investments credited to
the collection account and the spread account and any investment
income thereon;
(6) the rights of the seller (but not its obligations) under the
receivables purchase agreement; and
(7) all proceeds of the foregoing.
Exhibit A to Prospectus Supplement
FORM OF NOTE GUARANTY INSURANCE POLICY
OBLIGATIONS: $691,731,000 POLICY NUMBER: [ ]
ANRC Auto Owner Trust 2000-A,
6.72462% Asset-Backed Notes, Class A-1
7.00% Asset-Backed Notes, Class A-2
7.06% Asset-Backed Notes, Class A-3
7.15% Asset-Backed Notes, Class A-4
(collectively, the "Obligations")
MBIA Insurance Corporation (the "Insurer"), in consideration of the
payment of the premium and subject to the terms of this Note Guaranty
Insurance Policy (this "Policy"), hereby unconditionally and irrevocably
guarantees to any Owner that an amount equal to each full and complete
Insured Payment will be received from the Insurer by The Chase Manhattan
Bank, or its successors, as indenture trustee for the Owners (the
"Indenture Trustee"), on behalf of the Owners, for distribution by the
Indenture Trustee to each Owner of each Owner's proportionate share of the
Insured Payment. The Insurer's obligations hereunder with respect to a
particular Insured Payment shall be discharged to the extent funds equal to
the applicable Insured Payment are received by the Indenture Trustee,
whether or not such funds are properly applied by the Indenture Trustee.
Insured Payments shall be made only at the time set forth in this Policy,
and no accelerated Insured Payments shall be made regardless of any
acceleration of the Obligations, unless such acceleration is at the sole
option of the Insurer.
Notwithstanding the foregoing paragraph, this Policy does not cover
shortfalls, if any, attributable to the liability of the Issuer or the
Indenture Trustee for withholding taxes, if any (including interest and
penalties in respect of any such liability).
The Insurer will pay any Insured Payment that is a Preference Amount
on the Business Day following receipt on a Business Day by the Fiscal Agent
(as described below) of (a) a certified copy of the order requiring the
return of a preference payment, (b) an opinion of counsel satisfactory to
the Insurer that such order is final and not subject to appeal, (c) an
assignment in such form as is reasonably required by the Insurer,
irrevocably assigning to the Insurer all rights and claims of the Owner
relating to or arising under the Obligations against the debtor which made
such preference payment or otherwise with respect to such preference
payment and (d) appropriate instruments to effect the appointment of the
Insurer as agent for such Owner in any legal proceeding related to such
preference payment, such instruments being in a form satisfactory to the
Insurer, provided that if such documents are received after 12:00 noon, New
York City time, on such Business Day, they will be deemed to be received on
the following Business Day. Such payments shall be disbursed to the
receiver or trustee in bankruptcy named in the final order of the court
exercising jurisdiction on behalf of the Owner and not to any Owner
directly unless such Owner has returned principal or interest paid on the
Obligations to such receiver or trustee in bankruptcy, in which case such
payment shall be disbursed to such Owner.
The Insurer will pay any other amount payable hereunder no later than
12:00 noon, New York City time, on the later of the Distribution Date on
which the related Deficiency Amount is due or the second Business Day
following receipt in New York, New York on a Business Day by State Street
Bank and Trust Company, N.A., as Fiscal Agent for the Insurer, or any
successor fiscal agent appointed by the Insurer (the "Fiscal Agent"), of a
Notice (as described below), provided that if such Notice is received after
12:00 noon, New York City time, on such Business Day, it will be deemed to
be received on the following Business Day. If any such Notice received by
the Fiscal Agent is not in proper form or is otherwise insufficient for the
purpose of making claim hereunder, it shall be deemed not to have been
received by the Fiscal Agent for purposes of this paragraph, and the
Insurer or the Fiscal Agent, as the case may be, shall promptly so advise
the Indenture Trustee and the Indenture Trustee may submit an amended
Notice.
Insured Payments due hereunder, unless otherwise stated herein, will
be disbursed by the Fiscal Agent to the Indenture Trustee on behalf of the
Owners by wire transfer of immediately available funds in the amount of the
Insured Payment less, in respect of Insured Payments related to Preference
Amounts, any amount held by the Indenture Trustee for the payment of such
Insured Payment and legally available therefor.
The Fiscal Agent is the agent of the Insurer only, and the Fiscal
Agent shall in no event be liable to Owners for any acts of the Fiscal
Agent or any failure of the Insurer to deposit, or cause to be deposited,
sufficient funds to make payments due under this Policy.
Subject to the terms of the Agreement, the Insurer shall be
subrogated to the rights of each Owner to receive payments under the
Obligations to the extent of any payment by the Insurer hereunder.
As used herein, the following terms shall have the following
meanings:
"Agreement" means the Sale and Servicing Agreement dated as of
August 10, 2000 among AutoNation Financial Services Corp., as
Servicer and as Custodian, AutoNation Receivables Corporation, as
Seller, ANRC Auto Owner Trust 2000-A, as Issuer, and the Indenture
Trustee as indenture trustee, without regard to any amendment or
supplement thereto, unless such amendment or supplement has been
approved in writing by the Insurer.
"Business Day" means any day other than (a) a Saturday or a
Sunday, (b) a day on which the Insurer is closed or (c) a day on
which commercial banking institutions or savings associations located
in New York, New York or in the city in which the Owner Trustee
Corporate Trust Office or the Corporate Trust Office is located are
authorized or obligated by law, regulation, executive order or
governmental decree to be closed.
"Deficiency Amount" means for any Distribution Date, the sum of
(a) the excess, if any, of (i) the Note Interest Distributable Amount
with respect to all Classes of Notes for such Distribution Date over
(ii) the sum of (x) the Available Funds for such Distribution Date
(after giving effect to distributions pursuant to clauses (i) through
(iii) of Section 4.03(a) of the Agreement for such Distribution Date)
and (y) the amount to be on deposit in the Spread Account for such
Distribution Date (after giving effect to any withdrawals to pay
amounts pursuant to clauses (i) through (iii) of Section 4.03(a) of
the Agreement for such Distribution Date) and (b) the Guaranteed Note
Principal Amount for such Distribution Date.
"Guaranteed Note Principal Amount" shall mean for any
Distribution Date, the lesser of (a) the excess, if any, of (i) the
Note Principal Distributable Amount for such Distribution Date over
(ii) the sum of (x) the Available Funds for such Distribution Date
(after giving effect to distributions pursuant to clauses (i) through
(iv) of Section 4.03(a) of the Agreement for such Distribution Date)
and (y) the amount to be on deposit in the Spread Account for such
Distribution Date (after giving effect to any withdrawals to pay
amounts pursuant to clauses (i) through (iv) of Section 4.03(a) of
the Agreement for such Distribution Date) and (b) the excess, if any,
of (i) the Outstanding Principal Amount of the Notes for such
Distribution Date (after giving effect to all payments of principal
of the Notes on such Distribution Date other than from an Insured
Payment) over (ii) the sum of (x) the Pool Balance as of the last day
of the preceding Collection Period and (y) the amount to be on
deposit in the Spread Account (after giving effect to any withdrawals
to pay amounts pursuant to clauses (i) through (vi) of Section
4.03(a) of the Agreement for such Distribution Date); provided,
however, on the Final Scheduled Distribution Date for such Class of
Notes, the Guaranteed Note Principal Amount shall be at least equal
to the Outstanding Principal Amount of such Class of Notes on such
Final Scheduled Distribution Date (after giving effect to all
payments of principal of the Notes on such Final Scheduled
Distribution Date other than from an Insured Payment).
"Insured Payment" means (a) as of any Distribution Date, any
Deficiency Amount and (b) any Preference Amount.
"Notice" means the telephonic or telegraphic notice, promptly
confirmed in writing by facsimile substantially in the form of
Exhibit A attached hereto, the original of which is subsequently
delivered by registered or certified mail, from the Indenture Trustee
specifying the Insured Payment which shall be due and owing on the
applicable Distribution Date.
"Owner" means each Noteholder (as defined in the Agreement)
who, on the applicable Distribution Date, is entitled under the terms
of the applicable Notes to payment thereunder.
"Preference Amount" means any amount previously distributed to
an Owner on the Obligations that is recoverable and sought to be
recovered as a voidable preference by a trustee in bankruptcy
pursuant to the United States Bankruptcy Code (11 U.S.C.), as amended
from time to time in accordance with a final nonappealable order of a
court having competent jurisdiction.
Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Agreement as of the date of
execution of this Policy, without giving effect to any subsequent amendment
to or modification of the Agreement unless such amendment or modification
has been approved in writing by the Insurer.
Any notice hereunder or service of process on the Fiscal Agent may be
made at the address listed below for the Fiscal Agent or such other address
as the Insurer shall specify in writing to the Indenture Trustee.
The notice address of the Fiscal Agent is 15th Floor, 61 Broadway,
New York, New York 10006, Attention: Municipal Registrar and Paying Agency,
or such other address as the Fiscal Agent shall specify to the Indenture
Trustee in writing.
THIS POLICY IS BEING ISSUED UNDER AND PURSUANT TO, AND SHALL BE
CONSTRUED UNDER, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT
TO THE CONFLICT OF LAWS PRINCIPLES THEREOF.
The insurance provided by this Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the
New York Insurance Law.
This Policy is not cancelable for any reason. The premium on this
Policy is not refundable for any reason, including payment, or provision
being made for payment, prior to maturity of the Obligations.
IN WITNESS WHEREOF, the Insurer has caused this Policy to be executed
and attested this 10th day of August, 2000.
MBIA INSURANCE CORPORATION
By
-----------------------------------
Title
---------------------------------
Attest:
By
---------------------------
Secretary
EXHIBIT A
TO NOTE GUARANTY INSURANCE
POLICY NUMBER: [ ]
NOTICE UNDER NOTE GUARANTY
INSURANCE POLICY NUMBER:[ ]
State Street Bank and Trust Company, N.A., as Fiscal Agent
for MBIA Insurance Corporation
15th Floor
61 Broadway
New York, NY 10006
Attention: Municipal Registrar and
Paying Agency
MBIA Insurance Corporation
113 King Street
Armonk, NY 10504
The undersigned, a duly authorized officer of [NAME OF TRUSTEE], as
trustee (the "Indenture Trustee"), hereby certifies to State Street Bank
and Trust Company, N.A. (the "Fiscal Agent") and MBIA Insurance Corporation
(the "Insurer"), with reference to Note Guaranty Insurance Policy Number: [
] (the "Policy") issued by the Insurer in respect of the $691,731,000 ANRC
Auto Owner Trust 2000-A, 6.72462% Asset-Backed Notes, Class A-1, 7.00%
Asset-Backed Notes, Class A-2, 7.06% Asset-Backed Notes, Class A-3 and
7.15% Asset-Backed Notes, Class A-4 (the "Obligations"), that:
(a) the Indenture Trustee is the indenture trustee under the Sale
and Servicing Agreement dated as of August 10, 2000 among AutoNation
Financial Services Corp., as Servicer and as Custodian, AutoNation
Receivables Corporation, as Seller, ANRC Auto Owner Trust 2000-A, as
Issuer, and the Indenture Trustee, as indenture trustee for the
Owners;
(b) the amount under clause (a)(i) of the definition of
Deficiency Amount for the Distribution Date occurring on [ ] (the
"Applicable Distribution Date") is $[ ];
(c) the amount under clause (a)(ii) of the definition of
Deficiency Amount for the Applicable Distribution Date is $[ ];
(d) the excess, if any, of the amount in paragraph (b) above over
the amount in paragraph (c) above for the Applicable Distribution Date
is $[ ], which is the amount due under clause (a) of the definition of
Deficiency Amount for the Applicable Distribution Date;
(e) the amount due under clause (b) of the definition of
Deficiency Amount for the Applicable Distribution Date is $[ ];
(f) the sum of the amounts listed in paragraphs (d) and (e) above
is $[ ] (the "Deficiency Amount");
(g) the amount of previously distributed payments on the
Obligations that is recoverable and sought to be recovered as a
voidable preference by a trustee in bankruptcy pursuant to the
Bankruptcy Code in accordance with a final nonappealable order of a
court having competent jurisdiction is $[ ] (the "Preference Amount");
(h) the total Insured Payment due is $[ ], which amount equals
the sum of the Deficiency Amount and the Preference Amount;
(i) the Indenture Trustee is making a claim under and pursuant to
the terms of the Policy for the dollar amount of the Insured Payment
set forth in (f) above to be applied to the payment of the Deficiency
Amount for the Applicable Distribution Date in accordance with the
Agreement and for the dollar amount of the Insured Payment set forth
in (g) above to be applied to the payment of any Preference Amount;
and
(j) the Indenture Trustee directs that payment of the Insured
Payment be made to the following account by bank wire transfer of
federal or other immediately available funds in accordance with the
terms of the Policy: [TRUSTEE'S ACCOUNT NUMBER].
Any capitalized term used in this Notice and not otherwise defined
herein shall have the meaning assigned thereto in the Policy.
Any Person Who Knowingly And With Intent To Defraud Any Insurance Company
Or Other Person Files An Application For Insurance Or Statement Of Claim
Containing Any Materially False Information, Or Conceals For The Purpose Of
Misleading, Information Concerning Any Fact Material Thereto, Commits A
Fraudulent Insurance Act, Which Is A Crime, And Shall Also Be Subject To A
Civil Penalty Not To Exceed Five Thousand Dollars And The Stated Value Of
The Claim For Each Such Violation.
IN WITNESS WHEREOF, the Indenture Trustee has executed and delivered
this Notice under the Policy as of the [ ] day of [ ], [ ].
[NAME OF TRUSTEE], as Indenture Trustee
By
--------------------------------------
Title
-----------------------------------
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Neither the notes, the certificates nor the underlying contracts are
insured or guaranteed by AutoNation Receiv ables Corporation, AutoNation
Finan cial Services Corp. or any governmen tal agency.
The notes and the certificates will rep resent obligations of and interests
in a trust only and will not represent ob ligations of or interests in
AutoNation Receivables Corporation, AutoNation Financial Services Corp. or
any of their affiliates.
This prospectus may be used to offer and sell any series of notes or
certifi cates only if accompanied by the pro spectus supplement for that
series.
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Prospectus
ANRC AUTO OWNER TRUSTS
AUTONATION RECEIVABLES CORPORATION, Seller
AUTONATION FINANCIAL SERVICES CORP., Servicer
ASSET-BACKED NOTES AND CERTIFICATES
THE OWNER TRUSTS:
o may periodically issue asset-backed notes and certificates in one or
more series with one or more classes; and
o will own:
o fixed rate motor vehicle retail installment sales contracts
secured by new and used automobiles and light-duty trucks;
o collections on the contracts;
o liens on the financed vehicles and the rights to receive proceeds
from claims on insurance policies;
o funds in the accounts of the trust;
o any enhancements issued in favor of the trust; and
o proceeds of these assets.
THE NOTES:
o will represent obligations of a trust and will be paid only from the
assets of that trust;
o will be rated in one of the four highest rating categories by at least
one nationally recognized rating organization;
o may have one or more forms of enhancement; and
o will be issued as part of a series which may include one or more
classes of notes and certificates.
THE CERTIFICATES:
o will represent beneficial interests in a trust and will be paid only
from the assets of that trust;
o may have one or more forms of enhancement;
o will be issued as part of a series which may include one or more
classes of notes and certificates; and
o may be offered to the public or initially retained by the seller or
one of its affiliates.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED
WHETHER THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is August 3, 2000
TABLE OF CONTENTS
OVERVIEW OF THE INFORMATION IN THIS PROSPECTUS
AND THE PROSPECTUS SUPPLEMENT.............................................3
DESCRIPTION OF THE TRUSTS....................................................4
DESCRIPTION OF THE TRUSTEES..................................................5
AUTONATION FINANCIAL SERVICES' PORTFOLIO OF MOTOR
VEHICLE CONTRACTS.........................................................5
Origination of Motor Vehicle Contracts....................................5
Underwriting of Motor Vehicle Contracts...................................5
Insurance.................................................................8
Collection Procedures.....................................................8
Modifications and Extensions..............................................9
Delinquency and Loan Loss Information.....................................9
DESCRIPTION OF THE CONTRACTS.................................................9
The Receivables Pool......................................................9
Calculation Method.......................................................10
PREFUNDING ARRANGEMENTS.....................................................10
PREPAYMENT AND YIELD CONSIDERATIONS.........................................11
POOL FACTOR AND POOL INFORMATION............................................12
USE OF PROCEEDS.............................................................12
DESCRIPTION OF THE SELLER...................................................12
DESCRIPTION OF AUTONATION FINANCIAL SERVICES CORP...........................13
DESCRIPTION OF WORLD OMNI FINANCIAL CORP....................................14
DESCRIPTION OF AUTONATION, INC..............................................15
DESCRIPTION OF THE SECURITIES...............................................15
The Notes................................................................15
The Certificates.........................................................16
Ratings of the Securities................................................16
Principal and Interest on the Securities.................................16
Book-entry Registration..................................................17
Definitive Securities....................................................18
List of Securityholders..................................................19
Statements to Securityholders............................................19
DESCRIPTION OF THE TRANSFER AND SERVICING
AGREEMENTS...............................................................20
Sale and Assignment of the Contracts.....................................20
The Collection Account and Eligible
Investments...........................................................22
Other Accounts...........................................................23
Payments on Contracts....................................................23
Payments and Distributions on the
Securities............................................................23
Credit and Cash Flow Enhancement.........................................24
Insurance on Financed Motor Vehicles.....................................24
Servicer Reports to the Trustees and the
Insurer...............................................................24
Optional Purchase of Contracts...........................................25
Servicing Fee............................................................25
Waivers and Extensions...................................................25
Realization upon Defaulted Contracts.....................................25
Evidence as to Compliance................................................26
Material Matters Regarding the Servicer..................................26
Defaults by the Servicer.................................................27
Rights upon Default by the Servicer......................................27
Amendment................................................................28
Termination..............................................................29
The Owner Trustee and Indenture Trustee..................................29
Description of the Administration
Agreement.............................................................30
DESCRIPTION OF THE INDENTURE................................................30
Modification of Indenture................................................30
Events of Default under the Indenture; Rights
upon Event of Default.................................................32
Material Covenants.......................................................32
Annual Compliance Statement..............................................33
Indenture Trustee's Annual Report........................................33
Satisfaction and Discharge of Indenture..................................34
The Indenture Trustee....................................................34
LEGAL ASPECTS OF THE CONTRACTS..............................................34
Security Interests in the Financed Motor
Vehicles..............................................................34
Repossession.............................................................36
Notice of Sale; Redemption Rights........................................36
Deficiency Judgments and Excess Proceeds.................................36
Consumer Protection Laws.................................................37
Other Limitations........................................................38
Repurchase Obligation....................................................38
MATERIAL FEDERAL INCOME TAX CONSEQUENCES....................................39
Tax Characterization of Each Trust.......................................39
Tax Consequences to Holders of the Notes.................................40
Taxation of Non-U.S. Holders of Notes....................................43
Information Reporting and Backup
Withholding...........................................................44
Tax Consequences to Holders of the
Certificates..........................................................44
Taxation of Non-U.S. Holders of
Certificates..........................................................48
State and Local Taxation.................................................49
ERISA CONSIDERATIONS........................................................49
UNDERWRITING................................................................51
LEGAL MATTERS...............................................................51
REPORTS TO SECURITYHOLDERS..................................................51
WHERE YOU CAN FIND MORE INFORMATION.........................................52
GLOSSARY....................................................................53
OVERVIEW OF THE INFORMATION IN THIS PROSPECTUS
AND THE PROSPECTUS SUPPLEMENT
We provide information about your securities in two separate
documents: (a) this prospectus, which provides general information, some of
which may not apply to a particular series of notes or certificates,
including your series; and (b) the prospectus supplement, which describes
the specific terms of your series, including information about:
o the type of securities offered;
o the timing and amount of interest and principal payments;
o the contracts underlying your securities;
o the credit enhancement for each class;
o the credit ratings; and
o the method for selling the securities.
WHENEVER INFORMATION IN THE PROSPECTUS SUPPLEMENT IS MORE SPECIFIC
THAN THE INFORMATION IN THIS PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION
IN THE PROSPECTUS SUPPLEMENT.
You should rely only on the information provided in this prospectus
and the prospectus supplement, including the information incorporated by
reference. We have not authorized anyone to provide you with different
information.
We include cross-references in this prospectus and in the prospectus
supplement to captions in these materials where you can find further
related discussions. The preceding table of contents and the table of
contents included in the prospectus supplement provide the pages on which
these captions are located.
You can find a glossary where capitalized terms are defined beginning
on page 53 in this prospectus.
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TO UNDERSTAND THE STRUCTURE OF THESE SECURITIES, YOU MUST READ
CAREFULLY THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS
SUPPLEMENT IN THEIR ENTIRETY.
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DESCRIPTION OF THE TRUSTS
Each owner trust will from time to time issue asset-backed notes and
may issue asset-backed certificates in one or more series in amounts, at
prices and on terms to be determined at the time of sale and to be set
forth in a supplement to this prospectus.
With respect to each series of securities, AutoNation Receivables
Corporation, a wholly-owned special purpose, bankruptcy remote subsidiary
of AutoNation Financial Services Corp., as seller, will establish a
separate trust pursuant to an owner trust agreement, which may be amended
and supplemented from time to time, between the seller and the owner
trustee specified in the related prospectus supplement for the transactions
described herein and in the related prospectus supplement. The notes will
represent indebtedness of the related trust and will be issued and secured
pursuant to an indenture between the trust and the indenture trustee
specified in the related prospectus supplement.
To the extent specified in the related prospectus supplement, the
property of each trust will include:
(1) a pool of motor vehicle retail installment sales contracts,
all of which are secured by new and/or used automobiles and/or
light-duty trucks;
(2) documents relating to the contracts, including all servicing
records in hard or electronic form;
(3) collections and all other amounts due under the contracts
after the Cut-Off Date specified in the related prospectus supplement;
(4) liens on the related financed motor vehicles and the rights
to receive proceeds from claims on any related insurance policies
covering the financed motor vehicles or the related obligors;
(5) all amounts on deposit in the applicable trust accounts,
including the related collection account and any other account
identified in the applicable prospectus supplement, including all
Eligible Investments credited thereto (but excluding any investment
income from Eligible Investments which is to be paid to the servicer
of the contracts or as otherwise specified in the related prospectus
supplement);
(6) the benefits of any form of credit enhancement identified in
the applicable prospectus supplement;
(7) the right of the seller to cause AutoNation Financial
Services to repurchase any contracts with respect to which it breaches
any of its representations or warranties or its servicing obligations;
(8) any other property specified in the related prospectus
supplement; and
(9) all proceeds of the foregoing.
To the extent specified in the related prospectus supplement, an insurance
policy, reserve fund, spread account or other form of credit enhancement
may be a part of the property of any given trust or may be held by the
owner trustee or the indenture trustee for the benefit of holders of the
related securities.
Each trust will be formed in accordance with the laws of the State of
Delaware. Prior to formation, each trust will have no assets or
obligations. After formation, each trust will not engage in any activity
other than acquiring and holding the related contracts, issuing the related
securities, distributing payments in respect thereof and any other
activities described herein, in the related prospectus supplement and in
the owner trust agreement. Each trust will not acquire any contracts or
assets other than the Trust Property.
The principal offices of each trust, the owner trustee and the
indenture trustee will be specified in the applicable prospectus
supplement.
DESCRIPTION OF THE TRUSTEES
The owner trustee and the indenture trustee for each trust will be
specified in the related prospectus supplement. The owner trustee's and the
indenture trustee's liability in connection with the issuance and sale of
the related securities will be limited solely to the express obligations of
the owner trustee or indenture trustee as set forth in the related owner
trust agreement, the sale and servicing agreement and the indenture. An
owner trustee or indenture trustee with respect to a series of securities
may resign or be removed under the circumstances specified in the related
prospectus supplement. Any resignation or removal of an owner trustee or
indenture trustee and appointment of a successor trustee will not become
effective until acceptance of the appointment by that successor.
AUTONATION FINANCIAL SERVICES' PORTFOLIO OF MOTOR VEHICLE CONTRACTS
ORIGINATION OF MOTOR VEHICLE CONTRACTS
AutoNation Financial Services originates motor vehicle retail
installment sales contracts secured by new and used automobiles and
light-duty trucks in connection with providing financing for the purchase
of those vehicles. Motor vehicle contracts in AutoNation Financial
Services' serviced portfolio are currently originated from application
referrals received from: (1) franchised automotive dealerships; (2)
previously owned or licensed used vehicle megastores; (3) eight third party
franchised automotive dealerships. AutoNation Financial Services in the
future may contract with additional third party franchised automotive
dealerships or used car dealerships to provide additional application
referrals. AutoNation owns approximately 400 franchise automotive
dealerships in 19 states. These dealerships own and operate franchises
granted by manufacturers of approximately 35 different brands of vehicles.
See "Description of AutoNation, Inc."
Each dealer from which AutoNation Financial Services receives
application referrals has entered into a dealer agreement with AutoNation
Financial Services, whereby the applicable dealer represents, among other
things, that:
(1) it will comply with federal and state laws regarding motor
vehicle financing;
(2) it will obtain the requisite financial information of the
obligor required to extend credit; and
(3) it will truthfully disclose to AutoNation Financial Services
any applicable financial information, the identity of the obligor and
other specified information in connection with the loan transaction.
All of the contracts included in the Trust Property of a trust will
have been originated by AutoNation Financial Services from application
referrals from dealers or as specified in the related prospectus
supplement. Information relating to AutoNation Financial Services' serviced
portfolio of contracts is described in the accompanying prospectus
supplement under "AutoNation Financial Services' Portfolio of Motor Vehicle
Contracts - Origination of Motor Vehicle Contracts."
UNDERWRITING OF MOTOR VEHICLE CONTRACTS
AutoNation Financial Services focuses its originations on the prime
auto lending market, lending to individuals with better credit histories
and thereby assuming a lower risk of delayed payment or non-payment under
the motor vehicle contracts. AutoNation Financial Services underwrites
motor vehicle contracts referred to it from dealers through its Fort
Lauderdale, Florida dealer service center. The contract processing and
underwriting departments at the dealer service center are open to receive
application referrals at all times at which dealers are open for business.
Dealers fax applications to a third party credit application entry
company that receives the applications, enters the information into its
computer system and transmits the application via its own on-line, real
time connection to the dealer service center for review and approval.
Each applicant for a motor vehicle contract is evaluated individually
based on uniform underwriting standards developed by AutoNation Financial
Services. These underwriting standards are intended to assess a potential
obligor's ability to repay all amounts due under the motor vehicle contract
and the adequacy of the related financed vehicle as collateral, based upon
a review of the information contained in the motor vehicle contract
application. The material credit information required for the motor vehicle
contract application includes the applicant's income, deposit accounts,
liabilities, a real time credit history obtained from a third party credit
bureau reporting agency, employment history and a description of the
financed vehicle intended to secure the motor vehicle contract. The
material criteria considered in evaluating the individual applications are:
(1) stability of the obligor with specific regard to the
obligor's length of residence in his or her current home, occupation,
length of employment and whether the obligor rents or owns his or her
home;
(2) the obligor's payment history based on information known
directly by AutoNation Financial Services or provided by various
credit reporting agencies with respect to present and past debt;
(3) a debt service to gross monthly income ratio test;
(4) the principal amount requested under the motor vehicle
contract taking into account the age, type and market value of the
related financed vehicle and term of the motor vehicle contract;
(5) an empirically derived credit score; and
(6) a credit bureau score.
AutoNation Financial Services uses an empirically based credit
scoring process to objectively index the applicant's creditworthiness. The
credit scoring process entails the use of statistics to correlate common
characteristics with credit risk. Through the use of credit scoring,
AutoNation Financial Services is able to evaluate credit profiles in order
to quantify credit risk. AutoNation Financial Services' credit scoring
process is periodically reviewed to ensure its validity. In addition to
AutoNation Financial Services' credit scoring system, AutoNation Financial
Services uses consumer reporting agency scores or credit bureau scores to
assist in the underwriting process. The credit bureau score is a factor in
evaluating credit risk and provides the basis for the credit score.
AutoNation Financial Services' standard guidelines permit retail
installment contracts with credit scores of 580 and above to be
underwritten. The average credit score of the AutoNation Financial
Services' serviced portfolio as of June 30, 2000 was 691. A credit analyst
reviews each application, taking into account the applicable credit score
and the other criteria set forth above, except for a limited number of
applications which are automatically approved upon satisfaction of higher
thresholds in respect of the above-referenced approval criteria or which
are denied upon failure to satisfy AutoNation Financial Services' minimum
thresholds in respect of the above-referenced approval criteria. The
AutoNation Financial Services scoring process and consumer reporting agency
scores are intended to provide a basis for lending decisions, but are not
meant to supersede the judgment of the credit analyst in weighing and
considering all of the above-referenced approval criteria. On occasion,
AutoNation Financial Services approves loan applications at variance with
its standard credit guidelines. However, to gain approval, a loan
application that does not comply with all of AutoNation Financial Services'
guidelines must have strong compensating factors that demonstrate the
ability of the potential obligor to pay all amounts to become due under the
motor vehicle contract. If an application for a motor vehicle contract is
approved after failing to comply with AutoNation Financial Services'
guidelines, the approval generally occurs because the credit analyst has
conditioned the loan on additional requirements, such as a larger down
payment, a reduction in the term of the financing or the addition of a co-
applicant to the motor vehicle contract. However, AutoNation Financial
Services does not revise or recalculate the obligor's credit score to
reflect the strength of a co-applicant. Applicants not meeting AutoNation
Financial Services' underwriting guidelines may be transferred to non-prime
financing sources that have established referral relationships with
AutoNation Financial Services under which AutoNation Financial Services
receives a flat referral fee for each contract originated by the non-prime
finance company.
After review of an application, a credit analyst and/or manager
notifies the applicable dealer as to whether the application has been
approved (subject to the receipt of the required documentation), denied or
is the subject of a counter-offer. If the response to the dealer requires a
counter-offer from AutoNation Financial Services (which can include an
additional down payment, a reduction in the term of the financing, or the
addition of a co-applicant to the motor vehicle contract), those
stipulations become a condition of the approval. Subsequent to approval, if
AutoNation Financial Services is the chosen source of financing, AutoNation
Financial Services will obtain the necessary documentation for processing
the loan, consisting of the following:
(1) a signed application;
(2) the only original and a copy of the executed motor vehicle
contract;
(3) an agreement by the obligor to provide insurance;
(4) a report of sale or guarantee of title;
(5) an application for registration;
(6) a co-signer notification (if applicable);
(7) a copy of the contract for any supplemental warranty
purchased with respect to the financed vehicle;
(8) acceptable vehicle valuation documentation consisting of the
dealer invoice or sticker for new cars and reference to the most
recently published National Automobile Dealers Association Used Car
Price Guide or Kelly Blue Book, based on year, make and model of the
related financed vehicle for used cars; and
(9) any other required documentation.
Once the appropriate documentation is obtained for funding, the file
relating to the motor vehicle contract is forwarded to a contract processor
for a pre-funding audit. The contract processor then audits the documents
for completeness and consistency with the application, providing final
approval for purchase of the motor vehicle contract once these requirements
have been satisfied.
The amount advanced pursuant to AutoNation Financial Services'
underwriting guidelines for a motor vehicle contract is determined by the
applicant's credit score. For purposes of determining the advance rate,
AutoNation Financial Services segregates applicants into four tiers based
on their credit scores: (1) for tier I loans, AutoNation Financial Services
will advance up to 105% of the manufacturer's suggested retail price for a
new vehicle or up to 105% of the "retail" value stated in the most recently
published National Automobile Dealers Association Used Car Price Guide for
a used vehicle; (2) for tier II loans, AutoNation Financial Services will
advance up to 100% of the manufacturer's suggested retail price for a new
vehicle or up to 100% of the "retail" value stated in the most recently
published National Automobile Dealers Association Used Car Price Guide for
a used vehicle; (3) for tier III loans, AutoNation Financial Services will
advance up to 95% of the manufacturers suggested retail price for a new
vehicle or up to 95% of the "retail" value stated in the most recently
published National Automobile Dealers Association Used Car Price Guide for
a used vehicle and (4) for tier IV loans, AutoNation Financial Services
will advance up to 90% of the manufacturers suggested retail price for a
new vehicle or up to 90% of the "retail" value stated in the most recently
published National Automobile Dealers Association Used Car Price Guide for
a used vehicle, in each case plus taxes and title and license fees on the
financed vehicle averaging an additional 7%. However, the amount advanced
under a motor vehicle contract may be less, or in limited circumstances
more, than the maximum permissible amount due to a number of factors,
including down payment requirements, trade-in equity and credit score. In
addition, in connection with the financing of new and used vehicles,
AutoNation Financial Services will also finance accessories, extended
service contracts and other insurance products under a motor vehicle
contract. The average advance rate of the motor vehicle contracts is less
than 100%.
AutoNation Financial Services performs detailed analyses of its
portfolio of motor vehicle contracts to evaluate the effectiveness of its
credit guidelines and scoring process. If external economic factors, credit
delinquency levels or credit loss levels change, credit guidelines are
adjusted to maintain a level of asset quality deemed acceptable by
AutoNation Financial Services' management. Each day, the credit manager and
credit supervisors review a group of motor vehicle contracts to ensure that
credit analysts are following AutoNation Financial Services' established
policies and procedures. AutoNation Financial Services randomly reviews, on
a monthly basis, the quality of the motor vehicle contracts to ensure
compliance with established policies and procedures. In accordance with its
reasonable business judgment, AutoNation Financial Services' credit
underwriting standards may change at any time.
INSURANCE
The motor vehicle contracts require obligors to maintain specific
levels and types of insurance coverage to protect each financed vehicle
against loss due to theft or damage. AutoNation Financial Services requires
all financed vehicles to have insurance coverage, including comprehensive
fire, theft and collision coverage, insuring the financed vehicle in an
amount at least equal to the financed vehicle's fair market value. In
addition, AutoNation Financial Services requires the obligor's public
liability and property damage insurance coverage to meet or exceed the
applicable state minimum levels of coverage. All insurance policies must
also require the related insurance company to provide at least 30 days
prior written notice to AutoNation Financial Services before cancellation.
The dealers are responsible for ensuring that each obligor obtains proper
insurance coverage and that AutoNation Financial Services is named as loss
payee.
COLLECTION PROCEDURES
AutoNation Financial Services has established a comprehensive set of
collection policies and procedures, the application of which are performed
by World Omni Financial Corp. pursuant to a subservicing agreement between
AutoNation Financial Services and World Omni. These policies and procedures
utilize an automated collection system to assist in collection efforts and
the prompt investigation and evaluation of the causes of any delinquency.
The automated collection system provides relevant obligor information (for
example, current addresses, phone numbers and loan information), records of
all contacts with obligors and, in some cases, automated dialing. This
system records the obligor's promise to pay, allows supervisors to review
collection personnel activity, permits supervisors to modify priorities
regarding which obligors to contact and provides extensive reports
concerning motor vehicle contract delinquencies. Pursuant to AutoNation
Financial Services' collection policies and procedures, any obligor whose
motor vehicle contract has become delinquent is reviewed. Based upon the
creditworthiness of the particular obligor, initial contact with the
obligor on a delinquent contract is made between 5 and 12 days after
delinquency. After a motor vehicle contract is delinquent for 60 days and
all collection efforts have been exhausted, repossession procedures will be
implemented. However, if (1) a motor vehicle contract is deemed
uncollectible, (2) the financed vehicle is deemed by collection personnel
to be in danger of being damaged, destroyed or made unavailable for
repossession or (3) the obligor voluntarily surrenders the financed
vehicle, a repossession may occur without regard to the length or existence
of payment delinquency. The majority of repossessions are conducted by
third parties who are engaged in the business of repossessing vehicles for
secured parties. After repossession, the obligor, in accordance with
applicable state law, usually will have an additional 10 to 30 days to
redeem the financed vehicle before the financed vehicle is liquidated at
auction. Upon the sale of the repossessed vehicle, AutoNation Financial
Services will pursue any remaining deficiency to the extent deemed
practical and to the extent permitted by law.
Losses may occur in connection with delinquent motor vehicle
contracts and can arise in several ways, including the inability to locate
the financed vehicle or the obligor, uninsured losses or because of a
discharge of the obligor in a bankruptcy proceeding. AutoNation Financial
Services' current collection policies and procedures recognize losses (1)
at the time a motor vehicle contract is deemed uncollectible, (2) during
the month $40 or more under a motor vehicle contract becomes more than 120
days past due or (3) if the financed motor vehicle has been repossessed and
liquidated, whichever occurs first.
MODIFICATIONS AND EXTENSIONS
AutoNation Financial Services' collection policies and procedures, on
a case-by-case basis, may allow for extensions with respect to the Due
Dates of payments on motor vehicle contracts. With a few very limited
exceptions, these extensions are offered only in the following instances:
(1) if AutoNation Financial Services or its subservicer believes
that the obligor's financial difficulty has been resolved or will no
longer impair the obligor's ability to make future payments;
(2) the extension will result in the obligor's payments being
brought current;
(3) the total credit-related extensions granted on the motor
vehicle contract will not exceed six months in the aggregate or the
state maximum, whichever is lower;
(4) there has been no more than two credit-related extensions
granted on the motor vehicle contract in the immediately preceding
twelve months; and
(5) AutoNation Financial Services (or its assignee) had held the
motor vehicle contract for at least six months.
Any deviation from AutoNation Financial Services' collection policies
and procedures regarding the grant of an extension requires the concurrence
of a collection supervisor, collection manager and account manager.
DELINQUENCY AND LOAN LOSS INFORMATION
Information concerning the experience of AutoNation Financial
Services pertaining to delinquencies, loan losses and recoveries with
respect to its portfolio of motor vehicle contracts (including contracts
previously sold which AutoNation Financial Services continues to service)
will be set forth in each prospectus supplement. There can be no assurance
that the delinquency, loan loss and recovery experience on any contracts
related to a series of securities will be comparable to prior experience or
to the information provided.
DESCRIPTION OF THE CONTRACTS
THE RECEIVABLES POOL
The contracts to be purchased by each trust, also known as the
receivables pool, will be selected by the seller based upon the
satisfaction of several criteria, including that each contract:
(1) is secured by a financed motor vehicle that was insured at
the inception of the loan and, as of the related Cut-Off Date, has
not been repossessed without reinstatement;
(2) has not been identified on the computer files of the seller
as relating to an obligor who was the subject of a bankruptcy
proceeding as of the related Cut-Off Date;
(3) provides for fully amortizing level scheduled monthly
payments and for the accrual of interest at a fixed rate according to
the Simple Interest Method (except for the first and last payment,
which may be minimally different from the level payments); and
(4) satisfies any additional criteria specified in the related
prospectus supplement.
All of the contracts included in the Trust Property of a trust will have
been originated by AutoNation Financial Services based upon application
referrals from dealers or as specified in the related prospectus
supplement. The percentages of its serviced portfolio which represent
application referrals from dealerships, used vehicle megastores
and third party dealerships, respectively, may change over time. However,
because each application and related obligor will be evaluated by
AutoNation Financial Services based on the same underwriting criteria,
AutoNation Financial Services believes that changes over time of the
percentages of its serviced portfolio representing application referrals
from dealerships, used vehicle megastores and third party dealerships
should not have a material adverse effect on the overall credit quality of
the serviced portfolio. See "AutoNation Financial Services' Portfolio of
Motor Vehicle Contracts." The seller will not use any selection procedures
in selecting the contracts for each receivables pool that are materially
adverse to the securityholders of any series.
Additional information with respect to the receivables pool securing
each series of securities will be set forth in the related prospectus
supplement including, to the extent appropriate, the composition of the
contracts, the distribution by annual percentage rate, the distribution by
the states where the contracts were originated and the portion of the
receivables pool secured by new vehicles and used vehicles.
CALCULATION METHOD
Each of the contracts included in the Trust Property of a trust will
be a fixed rate contract where the allocation of each payment between
interest and principal is calculated using the Simple Interest Method. For
these contracts, interest accrued as of the Due Date is paid first, and
then the remaining payment is applied to the unpaid principal balance.
Accordingly, if an obligor pays the fixed monthly installment in advance of
the Due Date, the portion of the payment allocable to interest will be less
for that period since the preceding payment will be less than it would be
if the payment were made on the Due Date, and the portion of the payment
allocable to reduce the principal balance will be correspondingly greater.
Conversely, if an obligor pays the fixed monthly installment after its Due
Date, the portion of the payment allocable to interest for the period since
the preceding payment will be greater than it would be if the payment were
made on the Due Date, and the portion of the payment allocable to reduce
the principal balance will be correspondingly smaller. When necessary, an
adjustment is made at the maturity of the contract to the scheduled final
payment to reflect the larger or smaller, as the case may be, allocations
of payments to interest or principal under the contract as a result of
early or late payments, as the case may be.
The seller will sell or transfer contracts having an aggregate
principal balance specified in the related prospectus supplement as of the
Cut-Off Date to the applicable trust. The purchase price paid by each trust
for each contract included in the Trust Property of the trust will either
reflect the principal balance of the contract as of the Cut-Off Date
calculated under the Simple Interest Method or another amount as specified
in the related prospectus supplement.
PREFUNDING ARRANGEMENTS
To the extent provided in the related prospectus supplement for a
series of securities, the related owner trust agreement, the sale and
servicing agreement and the indenture may provide for a prefunding
arrangement under which the related trust commits to subsequently purchase
additional contracts from the seller following the date on which the trust
is established and the related securities are issued for a period not to
exceed three months and in an amount not to exceed 20% of the initial
principal balance of the securities. With respect to a series of
securities, the prefunding arrangement will require that any subsequent
contracts transferred to the trust conform to the requirements and
conditions provided in the related sale and servicing agreement including
the requirement that the subsequent contracts satisfy all of the same
credit and underwriting criteria as the initial contracts. If a prefunding
arrangement is utilized in connection with the issuance of a series of
securities, the servicer will establish an account, known as the prefunding
account, in the name of the indenture trustee for the benefit of the
securityholders into which a portion of the net proceeds received from the
sale of the securities will be deposited and from which funds will be
released during a specified period to purchase subsequent contracts from
the seller. Upon each conveyance of subsequent contracts to the applicable
trust, an amount equal to the purchase price paid by the seller to
AutoNation Financial Services for the subsequent contracts will be released
from the prefunding account and paid to the seller.
The utilization of a prefunding arrangement for a series of
securities is intended to improve the efficiency of the issuance of the
securities and the sale of the contracts to the related trust through the
incremental delivery of the applicable contracts on the Closing Date and
during a specified period following the Closing Date for that series of
securities. Prefunding arrangements allow for a more even accumulation of
the contracts by the seller and AutoNation Financial Services and the
issuance of a larger principal amount of securities than would be the case
without a prefunding arrangement.
Although subsequent contracts will be subject to the same credit
criteria and underwriting guidelines applied with respect to the
origination of the initial contracts, subsequent contracts may be of a
different credit quality and seasoning. The credit quality of the
subsequent contracts may vary as a result of increases or decreases in the
credit quality of the related obligors within the predefined acceptable
range, which variations could impact the performance of the overall pool of
contracts. The portfolio of initial contracts will also be subject to
greater seasoning than the subsequent contracts due to the length of time
elapsed from the dates of origination of those contracts and the sale of
those contracts to the related trust. Accordingly, less historical
performance information will be available with respect to the subsequent
contacts. Moreover, following the transfer of subsequent contracts to the
applicable trust, the characteristics of the entire pool of contracts
included in the trust may vary from those of the contracts initially
transferred to the trust.
PREPAYMENT AND YIELD CONSIDERATIONS
The weighted average life of the notes and the certificates of any
series will generally be influenced by the rate at which the principal
balances of the contracts are paid, which payments may be in the form of
scheduled payments or prepayments. Each contract is prepayable in full by
the obligor at any time without penalty. For this purpose, "prepayments"
include prepayments in full, liquidations due to default, receipt of
proceeds from physical damage, credit life and credit accident and health
insurance policies and receivables repurchased for administrative reasons.
Noteholders will bear all reinvestment risk resulting from a faster or
slower incidence of prepayment of receivables. Full and partial prepayments
on motor vehicle contracts included in the Trust Property of a trust will
be paid or distributed to the related securityholders on the next day a
principal or interest payment is to be made (or if that day is not a
business day (i.e., a Saturday, Sunday, a day on which the insurer, if any,
is closed or a day on which banking institutions in New York, New York or
in the city in which the indenture trustee's corporate trust office or the
owner trustee's corporate trust office is located are authorized or
obligated by law to be closed), on the next succeeding business day)
following the Collection Period in which they are received. To the extent
that any contract included in the Trust Property of a trust is prepaid in
full, whether by the obligor, or as the result of a purchase by the
servicer or a repurchase by the seller or otherwise, the actual weighted
average life of the contracts included in the Trust Property of the trust
will be shorter than a weighted average life calculation based on the
assumptions that payments will be made on schedule and that no prepayments
will be made. Weighted average life means the average amount of time until
the entire principal amount of a contract is repaid. Full prepayments may
also result from liquidations due to default, receipt of proceeds from
theft, physical damage, credit life and credit disability insurance
policies, repurchases by the seller as a result of the failure of a
contract to meet the criteria set forth in the related sale and servicing
agreement or purchases by the servicer as a result of a breach of its
covenants with respect to the contracts made by it or its servicing duties
in the related sale and servicing agreement. In addition, early retirement
of the securities may be effected by the servicer exercising its option to
purchase the remaining contracts included in the Trust Property of the
trust on any Distribution Date as of which the Pool Balance (after giving
effect to the principal payments and distributions otherwise to be made on
that Distribution Date) has declined to the percentage of the original Pool
Balance specified in the related prospectus supplement. See "Description of
the Transfer and Servicing Agreements--Optional Purchase of Contracts."
The rate of full prepayments by obligors on the contracts may be
influenced by a variety of economic, social and other factors. These
factors include the unemployment rate, servicing decisions, seasoning of
loans, destruction of vehicles by accident, loss of vehicles due to theft,
sales of vehicles, market interest rates, the availability of alternative
financing and restrictions on the obligor's ability to sell or transfer the
financed motor vehicle securing a contract without the consent of the
servicer. Any full prepayments reduce the average life of the contracts.
AutoNation Financial Services has a limited operating history and
limited historical experience with respect to prepayments and can make no
prediction as to the actual prepayment rates that will be experienced on
the contracts included in the Trust Property of any trust in either stable
or changing interest rate environments. Securityholders of each series will
bear all reinvestment risk resulting from the rate of prepayment of the
contracts included in the Trust Property of the related trust.
POOL FACTOR AND POOL INFORMATION
For each trust, the Pool Factor will be a six-digit decimal which the
servicer will compute each month indicating the Pool Balance at the end of
the month as a fraction of (1) the Original Pool Balance plus (2) the
aggregate principal balance of any subsequent contracts added to the trust
as of the applicable subsequent Cut-Off Date. The Pool Factor will be
1.000000 as of the Closing Date; thereafter, the Pool Factor will decline
to reflect reductions in the Pool Balance. The amount of a securityholder's
pro rata share of the Pool Balance for a given month can be determined by
multiplying the original denomination of the holder's security by the Pool
Factor for that month.
With respect to each trust, the securityholders of record will
receive monthly reports from the owner trustee or indenture trustee, as
applicable, concerning payments received on the contracts, the Pool
Balance, the Pool Factor and other relevant information. The Depository
Trust Company will supply these reports to securityholders in accordance
with its procedures. Since owners of beneficial interests in a global
security of a given series will not be recognized as securityholders of
that series, DTC will not forward monthly reports to those owners. Copies
of monthly reports may be obtained by owners of beneficial interests in a
global security by a request in writing addressed to the owner trustee or
indenture trustee, as applicable. Securityholders of record during any
calendar year will be furnished information for tax reporting purposes not
later than the latest date permitted by federal and/or state law. See
"Description of the Securities - Statements to Securityholders."
USE OF PROCEEDS
The net proceeds from the sale of securities of a given series will
be applied by the applicable trust (1) to purchase the contracts from the
seller pursuant to the related sale and servicing agreement, (2) to deposit
any amounts if applicable, to the prefunding account and to fund any other
collateral accounts and (3) to pay other expenses in connection with the
issuance of the securities. The net proceeds to be received by the seller
from the sale of the contracts to the applicable trust will be used by the
seller to repay indebtedness incurred, or to pay other amounts owed, in
connection with its acquisition of the contracts from AutoNation Financial
Services and to pay other expenses in connection with the pooling of the
contracts and the issuance of the securities. AutoNation Financial Services
will use the proceeds from the sale of the contracts for general corporate
purposes.
DESCRIPTION OF THE SELLER
The seller, AutoNation Receivables Corporation, a wholly-owned,
special purpose, bankruptcy remote subsidiary of AutoNation Financial
Services, was incorporated under the laws of the State of Delaware on June
18, 1999 and has a limited operating history. The seller was organized for
the limited purpose of purchasing retail installment sales contracts from
AutoNation Financial Services and transferring those contracts to third
parties and any activities incidental to and necessary or convenient for
the accomplishment of that purpose. The principal offices of the seller are
located at 110 South East 6th Street, Fort Lauderdale, Florida 33301. The
telephone number of the seller's offices is (954) 769-7000.
AutoNation Financial Services and the seller have taken and will take
steps in structuring the transactions contemplated hereby that are intended
to ensure that the voluntary or involuntary application for relief by
AutoNation Financial Services under the United States Bankruptcy Code or
similar state laws will not result in consolidation of the assets and
liabilities of the seller with those of AutoNation Financial Services.
These steps include the creation of the seller as a separate, limited
purpose subsidiary pursuant to a certificate of incorporation containing
limitations on the scope of the seller's activities (including restrictions
on the nature of the seller's business and a restriction on the seller's
ability to commence a voluntary case or proceeding under the Bankruptcy
Code or any similar state law without the unanimous affirmative vote of all
of its directors).
In addition, the seller has received the advice of counsel to the
effect that, based on a reasoned analysis of analogous case law (although
there is no precedent based on directly similar facts), subject to the
facts, assumptions and qualifications relied upon by counsel, it would not
be a proper exercise by a court of its equitable discretion to disregard
the separate corporate existence of the seller and to require the
consolidation of the assets and liabilities of the seller with the assets
and liabilities of AutoNation Financial Services in the event of the
application of the Bankruptcy Code or any similar state law to AutoNation
Financial Services. However, there can be no assurance that the activities
of the seller would not result in a court concluding that the assets and
liabilities of the seller should be consolidated with those of AutoNation
Financial Services. If a court were to reach that conclusion, or a filing
were made under the Bankruptcy Code or any similar state law by or against
AutoNation Financial Services, or if an attempt were made to litigate any
of the foregoing issues, delays in payments or distributions on any
outstanding series of securities could occur or reductions in the amounts
of payments or distributions could result.
The contracts included in the Trust Property of each trust will have
been sold by AutoNation Financial Services to the seller pursuant to a
receivables purchase agreement between AutoNation Financial Services and
the seller or as specified in the related prospectus supplement. The
contracts to be included in the Trust Property of each trust will be sold
by the seller to the applicable trust pursuant to a sale and servicing
agreement. AutoNation Financial Services and the seller intend that each
transfer of contracts by AutoNation Financial Services to the seller under
the applicable receivables purchase agreement or otherwise will constitute
a "true sale" of the contracts to the seller. If a transfer of contracts
constitutes a "true sale," those contracts and the proceeds thereof would
not be part of the bankruptcy estate of AutoNation Financial Services under
Section 541 of the Bankruptcy Code should AutoNation Financial Services
become the subject of a bankruptcy case subsequent to the transfer of the
contracts to the seller.
The seller has received the advice of counsel to the effect that,
based on a reasoned analysis of analogous case law (although there is no
precedent based on directly similar facts), subject to the facts,
assumptions and qualifications relied upon by counsel, in the event that
AutoNation Financial Services were to become the subject of a voluntary or
involuntary case under the Bankruptcy Code subsequent to the transfer of
contracts to the seller, the transfer of the contracts by AutoNation
Financial Services to the seller would be characterized as a "true sale" of
the contracts from AutoNation Financial Services to the seller and the
contracts and the proceeds thereof would not form part of AutoNation
Financial Services' bankruptcy estate pursuant to Section 541 of the
Bankruptcy Code.
In Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th Cir.
1993), cert. denied, 114 S. Ct. 554 (1993), the United States Court of
Appeals for the 10th Circuit suggested that even where a transfer of
accounts from a seller to a buyer constitutes a "true sale," the accounts
would nevertheless constitute property of the seller's bankruptcy estate in
a bankruptcy of the seller. If AutoNation Financial Services were to be
placed into receivership and a court were to follow the Octagon court's
reasoning, securityholders might experience delays in payment or possibly
losses on their investment in the securities. Counsel has advised the
seller that the Octagon case appears to be inconsistent with established
precedent and the Uniform Commercial Code. Accordingly, the Octagon case
should not be binding precedent on a court in a receivership proceeding.
DESCRIPTION OF AUTONATION FINANCIAL SERVICES CORP.
AutoNation Financial Services Corp. will act as the servicer with
respect to the contracts. AutoNation Financial Services, a wholly-owned
subsidiary of AutoNation, was incorporated in the State of Delaware on
February 6, 1997. AutoNation Financial Services is dedicated to providing
financial products and services to customers of AutoNation's franchised
automotive dealerships and to third party dealers. As of June 30, 2000,
AutoNation Financial Services had nearly 147,000 customers and almost $2
billion in managed assets. The range of AutoNation Financial Services'
products includes retail loan financing, secondary customer referral
programs, vehicle protection and maintenance programs and insurance
products. AutoNation Financial Services is headed by a management team with
extensive experience in the origination and servicing of automobile retail
installment sales contracts and loans. AutoNation Financial Services'
principal executive offices are located at 110 South East 6th Street, Fort
Lauderdale, Florida 33301.
Currently, AutoNation Financial Services does not intend to directly
service the contracts transferred to the trusts. AutoNation Financial
Services presently delegates the majority of its servicing responsibilities
with respect to its serviced portfolio to World Omni pursuant to a
subservicing agreement. Subject to oversight by AutoNation Financial
Services, World Omni currently handles operational accounting and customer
inquiries for AutoNation Financial Services, as well as all collection
activities in respect of delinquent contracts and, where appropriate,
repossesses financed motor vehicles. World Omni also currently performs the
prefunding file audit with respect to each contract to verify that all
required documentation has been received in connection with each contract
and that the documentation conforms to AutoNation Financial Services'
requirements. In addition, World Omni currently acts as custodian of the
documents relating to each contract. Pursuant to the subservicing
agreement, World Omni has agreed, subject to an event of default
thereunder, to service all contracts originated during the term of the
subservicing agreement by AutoNation Financial Services until their
maturity in accordance with AutoNation Financial Services' collection
procedures. AutoNation Financial Services retains responsibility for
investing and reinvesting of funds and reporting. In addition, pursuant to
the subservicing agreement, AutoNation Financial Services has the right,
subject to any consent rights, if any, of any applicable insurer, in the
future to assume additional servicing functions (including, but not limited
to, collection activities for first payment defaults, remarketing of
vehicles following repossession and collection activities in respect of
salvage accounts). See "AutoNation Financial Services' Portfolio of Motor
Vehicle Contracts - Collection Procedures".
Notwithstanding the delegation by the servicer of its servicing
duties to World Omni, the servicer will remain primarily liable to the
trust under the sale and servicing agreement for the performance of those
duties. However, if at any time World Omni is in default in the performance
of its subservicing obligations and the indenture trustee is unwilling to
act as successor servicer, AutoNation Financial Services would be required
to commence servicing its portfolio itself or to engage a new subservicer
to service the portfolio. At the present time, AutoNation Financial
Services does not have the capacity to service its serviced portfolio, and
therefore would be required to engage a new third party subservicer. If
AutoNation Financial Services were required to engage a new subservicer,
the transfer of servicing functions from World Omni to the successor
subservicer could encounter operational and logistical difficulties that
would impair the servicing of the contracts during the servicing transition
period. Industry experience indicates that increases in delinquencies and
defaults on contracts are likely to result immediately following servicing
transfers.
DESCRIPTION OF WORLD OMNI FINANCIAL CORP.
World Omni Financial Corp., a Florida corporation and wholly-owned
subsidiary of JM Family Enterprises, Inc., services automobile-related
retail lease, retail installment and wholesale loan portfolios originated
by it and other parties, including AutoNation Financial Services. As of
June 30, 2000, World Omni's serviced portfolio (excluding third parties)
consisted of approximately 386,424 leases and retail contracts with an
aggregate outstanding balance of approximately $6.8 billion. Pursuant to
the subservicing agreement, World Omni acts as subservicer of the motor
vehicle contracts originated by AutoNation Financial Services. As of June
30, 2000, AutoNation Financial Services' portfolio serviced by World Omni
consisted of 146,533 leases and retail contracts with an outstanding
balance of approximately $1.93 billion. World Omni currently services the
contracts through its St. Louis operations center.
The information provided in the preceding paragraph was provided by
World Omni. None of the trust, the seller or AutoNation Financial Services
has made any independent verification of the accuracy or completeness of
that information.
DESCRIPTION OF AUTONATION, INC.
AutoNation, Inc. is the largest automotive retailer in the
United States, with approximately 400 new vehicle franchises in 19 states.
The company also operates one of the largest virtual dealerships offering
one of the Internet's largest selection of new and used vehicles through
AutoNation.com.
In December 1999, AutoNation announced that it would exit the
used vehicle megastore category of the automotive retail business by
closing 23 AutoNation USA megastores and integrating the remaining
megastore facilities with new vehicle franchises. The company has completed
the closure of these megastores and has largely completed the relocation of
franchised new vehicle dealerships into former megastore facilities. In
August 1999, AutoNation announced its intention to separate the Company's
automotive rental subsidiary, now incorporated as ANC Rental Corporation,
from its automotive retail business. At June 30, 2000, all of the shares of
ANC Rental Corporation's common stock were distributed to AutoNation
shareholders of record as of June 16, 2000, in the form of a tax-free
dividend completing the separation. As a result, AutoNation now operates
exclusively within the automotive retail business.
AutoNation, Inc. is a publicly-held company incorporated in the
State of Delaware. Prior to April 6, 1999, AutoNation was known as Republic
Industries, Inc. AutoNation is listed on the New York Stock Exchange under
the symbol "AN". Its principal executive offices are located at 110 South
East 6th Street, Fort Lauderdale, Florida 33301.
DESCRIPTION OF THE SECURITIES
A series of securities may include one or more classes of notes and
certificates. Each trust will issue the notes and the certificates for a
particular series to the holders of record of the notes and the holders of
record of the certificates, respectively. The following summary, together
with the summaries contained under "Description of the Notes" and, if
applicable, "Description of the Certificates" in the prospectus supplement,
describe all of the material terms of the securities. However, this summary
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the notes, the
certificates, the indenture, the owner trust agreement and the related
prospectus supplement, as applicable.
THE NOTES
Each series may include one or more classes of notes. The notes will
be issued by the related trust pursuant to the terms of an indenture, a
form of which has been filed as an exhibit to the registration statement of
which this prospectus is a part. The related prospectus supplement will
specify which class or classes of notes of a series are being offered
thereby.
To the extent specified in the prospectus supplement, notes will be
available for purchase in minimum denominations of $1,000 and in integral
multiples thereof and will be available in book-entry form only.
Noteholders will be able to receive notes in definitive registered form
only in the limited circumstances described herein or in the prospectus
supplement. See "Description of the Securities--Definitive Securities."
Each class of notes will have a stated note principal balance
specified in the related prospectus supplement and will accrue interest on
the Note Principal Balance at the interest rate specified for that class of
notes. Each class of notes may have a different interest rate, which may be
a fixed, variable or adjustable interest rate, or any combination of the
foregoing. The related prospectus supplement will specify the interest rate
for each class of notes specified as being offered by the prospectus
supplement or the method for determining the interest rate or rates.
With respect to a series that includes two or more classes of notes,
as specified in the related prospectus supplement, each class may differ as
to timing and priority of payments, seniority, allocations of losses,
interest rates or amounts of payments of principal or interest. Payments of
principal or interest in respect of any class or classes may or may not be
made upon the occurrence of specified events or on the basis of collections
from designated contracts. In addition, a series may include one or more
classes of Strip Notes.
If the seller, the servicer or a successor thereto exercises its
option to purchase the contracts of a trust in the manner and on the
respective terms and conditions described under "Description of the
Transfer and Servicing Agreements - Termination," the outstanding notes
will be redeemed as set forth in the related prospectus supplement.
THE CERTIFICATES
Each series may also include one or more classes of certificates. The
certificates will be issued by the related trust pursuant to the terms of
an owner trust agreement, the form of which has been filed as an exhibit to
the registration statement of which this prospectus is a part. The related
prospectus supplement will specify which class or classes of certificates,
if any, of a series are being offered thereby.
If specified in the related prospectus supplement, certificates
offered to the public will be available for purchase in minimum
denominations of $1,000 and in integral multiples thereof and will be
available in book-entry form only. Certificateholders will be able to
receive certificates in definitive registered form only in the limited
circumstances described herein or in the prospectus supplement. See
"Description of the Securities--Definitive Securities."
Each class of certificates will have a stated certificate principal
balance specified in the related prospectus supplement and may, but need
not, accrue interest on the Certificate Principal Balance at the interest
rate specified for that class of certificates. Each class of certificates
may have a different interest rate, which may be a fixed, variable or
adjustable interest rate, or any combination of the foregoing. The related
prospectus supplement will specify the interest rate for each class of
certificates specified as being offered by the related prospectus
supplement or the method for determining the interest rate or rates.
With respect to a series that includes two or more classes of
certificates, as specified in the related prospectus supplement, each class
may differ as to timing and priority of distributions, seniority,
allocations of losses, interest rates or amounts of distributions in
respect of principal or interest. Distributions of principal or interest in
respect of any class or classes of certificates may or may not be made upon
the occurrence of specified events or on the basis of collections from
designated contracts. In addition, a series may include one or more classes
of Strip Certificates.
RATINGS OF THE SECURITIES
It will be a condition to the issuance of each class of securities
specified as being offered by the related prospectus supplement that each
class of securities be rated in one of the four highest generic rating
categories established for the securities by at least one nationally
recognized statistical rating agency and receive the rating specified in
the related prospectus supplement by at least one rating agency.
PRINCIPAL AND INTEREST ON THE SECURITIES
The timing and priority of payment, seniority, allocations of losses,
interest rates and amount of or method of determining payments or
distributions of principal of and interest on each class of securities of a
given series will be described in the related prospectus supplement. The
right of holders of any class of securities to receive payments or
distributions of principal and interest may be senior or subordinate to the
rights of holders of any other class or classes of securities of the
related series, as described in the related prospectus supplement. If
specified in the related prospectus supplement, payments of interest on the
securities of a series will be made prior to payments of principal thereon.
To the extent provided in the related prospectus supplement, a series may
include one or more classes of Strip Notes or Strip Certificates as
described above under "Description of the Securities - The Notes" and "-The
Certificates." Each class of securities may have a different interest rate
which may be a fixed, variable or adjustable interest rate (and which may
be zero for particular classes of Strip Notes or Strip Certificates), or
may not bear interest, or any combination of the foregoing. One or more
classes of securities of a series may be redeemable in whole or in part
under the circumstances specified in the related prospectus supplement,
including as a result of the servicer exercising its option to purchase the
remaining related contracts.
In the case of a series of securities which includes two or more
classes of securities, the sequential order and priority of payments or
distributions in respect of principal and interest, and any schedule or
formula or other provisions applicable to the determination thereof, of
each class will be set forth in the related prospectus supplement. Payments
or distributions in respect of principal and interest of any class of
securities will be made on a pro rata basis among all the securityholders
of that class.
BOOK-ENTRY REGISTRATION
If specified in the related prospectus supplement, each class of
securities offered hereby will be initially represented by one or more
global securities registered in the name of Cede & Co., as nominee for The
Depository Trust Company, also known as DTC. Securityholders may hold
beneficial interests in the securities through DTC directly if they are
participants in DTC or indirectly through organizations which are
participants in DTC.
Cede & Co., as nominee for DTC, will hold the global securities of each
series. Transfers between DTC participants will occur in the ordinary way
in accordance with DTC rules.
DTC is a limited purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and
a "clearing agency" registered pursuant to Section 17A of the Securities
Exchange Act of 1934, as amended. DTC was created to hold securities for
its participants and to facilitate the clearance and settlement of
securities transactions between its participants through electronic
book-entry changes in accounts of its participants, thereby eliminating the
need for physical movement of notes or certificates. DTC's participants
include securities brokers and dealers, banks, trust companies and clearing
corporations which may include underwriters, agents or dealers with respect
to the securities of any class or series. DTC is owned by a number of its
participants and the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc.
Indirect access to the DTC system also is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain
a custodial relationship with a DTC participant, either directly or
indirectly. The rules applicable to DTC and its participants are on file
with the SEC.
Owners of beneficial interests in securities that are in book-entry
form that are not direct or indirect DTC participants but desire to
purchase, sell or otherwise transfer ownership of, or other interests in,
securities may do so only through DTC's direct and indirect participants.
In addition, securityholders of a given series will receive all
distributions of principal and interest in respect of the securities from
the indenture trustee or owner trustee through DTC participants who in turn
will receive them from DTC. Under a book-entry format, owners of beneficial
interests in a global security of a given series may experience some delay
in their receipt of payments, since all payments will be forwarded by the
indenture trustee or owner trustee, as applicable, to Cede & Co., as
nominee of DTC. DTC will forward those payments to its participants which
thereafter will forward them to indirect participants or owners of
beneficial interests in a global security. It is anticipated that the only
"securityholder" in respect of any series will be Cede & Co., as nominee of
DTC. Owners of beneficial interests in a global security of a given series
will not be recognized as securityholders of that series, and owners of
beneficial interests in a global security will be permitted to exercise the
rights of securityholders only indirectly through DTC and its participants
who, in turn, will exercise the rights of owners of beneficial interests in
a global security through DTC.
Under the rules, regulations and procedures creating and affecting
DTC and its operations, DTC is required to make book-entry transfers of
securities of a given series among its participants on whose behalf it acts
with respect to those securities and is required to receive and transmit
distributions of principal of, and interest on, those securities. Direct
and indirect participants with which owners of beneficial interests in a
global security of a given series have accounts with respect to the
securities of that series similarly are required to make book-entry
transfers and receive and transmit payments on behalf of their respective
owners. Accordingly, although owners of beneficial interests in a global
security will not possess securities, those owners will receive payments
and will be able to transfer their interests.
Because DTC can only act on behalf of its direct participants, who in
turn act on behalf of indirect participants and banks, the ability of an
owner of a beneficial interest in a global security of a given series to
pledge securities of that series to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of
those securities, may be limited due to the lack of a physical certificate
for those securities.
DTC has advised the seller that, with respect to each series, it will
take any action permitted to be taken by a securityholder of that series
only at the direction of one or more of its participants to whose account
with DTC the securities of that series are credited. Additionally, DTC has
advised the seller that it will take actions with respect to specified
percentages of the securityholder's interest only at the direction of and
on behalf of its participants whose holdings include undivided interests
that satisfy those specified percentages. DTC may take conflicting actions
with respect to other undivided interests to the extent that those actions
are taken on behalf of its participants whose holdings include those
undivided interests.
Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of securities among participants of DTC, it is under
no obligation to perform or continue to perform these procedures and the
foregoing procedures may be discontinued at any time.
DEFINITIVE SECURITIES
The securities of a given series will be issued in fully registered,
certificated form to owners of beneficial interests in a global security or
their nominees rather than to DTC or its nominee, only (1) if the seller,
the applicable owner trustee or indenture trustee or the administrator, as
applicable, advises the owner trustee and indenture trustee in writing that
DTC is no longer willing or able to discharge properly its responsibilities
as depositary with respect to the securities, and the seller, the
applicable owner trustee or indenture trustee or the administrator are
unable to locate a qualified successor, (2) if after the occurrence of an
event of default under the related indenture or an event of default under
the related sale and servicing agreement, owners of beneficial interests in
a global security representing in the aggregate more than 50% of the
outstanding principal amount of the securities of that series advise the
applicable owner trustee and indenture trustee through DTC participants in
writing that the continuation of a book-entry system with respect to the
securities through DTC is no longer in the best interest of those owners or
(3) under any other circumstances specified in the related prospectus
supplement.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the applicable owner trustee and indenture trustee
will be required to notify all owners of beneficial interests in a global
security, through DTC participants, of the availability through DTC of
securities in definitive registered form. Upon surrender by DTC of the
definitive global securities representing the securities and instructions
for re-registration, the applicable owner trustee and indenture trustee
will reissue the securities in definitive registered form, and thereafter
the applicable owner trustee and indenture trustee will recognize the
holders of the definitive registered securities as securityholders.
Payments or distributions of principal of, and interest on, the
securities will be made by a paying agent directly to holders of securities
in definitive registered form in accordance with the procedures set forth
herein and in the related indenture or the related owner trust agreement.
Payments or distributions on each Distribution Date and on the final
scheduled Distribution Date (as specified in the related prospectus
supplement) will be made to holders in whose names the definitive
securities were registered at the close of business on the Record Date.
Payments or distributions will be made by check mailed to the address of
each securityholder as it appears on the register maintained by the
applicable owner trustee or indenture trustee or by other means to the
extent provided in the related prospectus supplement. The final payment or
distribution on any security (whether securities in definitive registered
form or the security registered in the name of Cede & Co.), however, will
be made only upon presentation and surrender of the security at the office
or agency specified in the notice of final payment or distribution to
securityholders.
Securities in definitive registered form will be transferable and
exchangeable at the offices of the applicable owner trustee or indenture
trustee, or at the offices of a transfer agent or registrar named in a
notice delivered to holders of securities in definitive registered form,
which shall initially be the applicable owner trustee or indenture trustee.
No service charge will be imposed for any registration of transfer or
exchange, but the applicable owner trustee, indenture trustee, transfer
agent or registrar may require payment of a sum sufficient to cover any tax
or other governmental charge imposed in connection therewith.
LIST OF SECURITYHOLDERS
With respect to the notes of any series, the related indenture
trustee will provide to the issuer and the administrator, if any, (1) not
more than five days after the earlier of (a) each Record Date and (b) three
months after the last Record Date, a list of the names and addresses of the
holders of the related notes as of such Record Date and (2) at any other
times that the issuer requests in writing, within 30 days after receipt by
the related indenture trustee of the request, a list of the names and
addresses of the holders of the related notes as of a date not more than
ten days prior to the time the list is furnished.
With respect to the certificates of any series, upon written request
of the issuer, the related owner trustee will provide to the issuer and the
administrator, if any, within 30 days after receipt of the issuer's request
a list of the names and addresses of all certificateholders of record as of
the most recent Record Date. Upon written request by three or more holders
of the certificates of a given series or by holders of certificates
evidencing not less than 25% of the aggregate outstanding principal amount
of those certificates, the related owner trustee will afford the requesting
certificateholders access during business hours to the current list of
certificateholders for purposes of communicating with other
certificateholders with respect to their rights under the related owner
trust agreement or under the certificates. Neither the owner trust
agreement nor the indenture will provide for the holding of annual or other
meetings of securityholders.
STATEMENTS TO SECURITYHOLDERS
With respect to each series of securities, on each Distribution Date
the applicable owner trustee or indenture trustee will include with each
payment or distribution to each securityholder a statement setting forth
for that Distribution Date the following information (and any additional
information so specified in the related prospectus supplement):
(1) the amount of the distribution on or with respect to each
class of the securities allocable to principal;
(2) the amount of the distribution on or with respect to each
class of the securities allocable to interest;
(3) the aggregate distribution amount for that Distribution Date;
(4) the premiums payable to the related third-party insurer
pursuant to the related financial guarantee insurance policy, if any,
the balance of any fund or account with respect to any credit or
liquidity enhancement on that Distribution Date, after giving effect
to changes thereto on that Distribution Date and the amount to be
deposited in the spread account, if any;
(5) the number of, and aggregate amount of monthly principal and
interest payments due on, the related contracts which are delinquent
as of the end of the related Collection Period presented in 30-day
increments;
(6) the aggregate servicing fee paid to the servicer with respect
to the related contracts for the related Distribution Date;
(7) the amount available in the collection account for payment of
the aggregate amount payable or distributable on the securities, the
amount of the servicing fee, the amount of any principal or interest
shortfall with respect to each class of securities and the amount
required from any applicable insurer pursuant to the related insurance
policy to pay any shortfall;
(8) the aggregate amount of proceeds received by the servicer,
net of recoverable out-of-pocket expenses, in respect of a contract
which is a Defaulted Contract;
(9) the number and net outstanding balance of contracts for which
the related financed motor vehicle has been repossessed; and
(10) the Pool Balance.
DTC will supply these reports to securityholders in accordance with its
procedures. Since owners of beneficial interests in a global security of a
given series will not be recognized as securityholders of that series, DTC
will not forward monthly reports to those owners. Copies of monthly reports
may be obtained by owners of beneficial interests in a global security by a
request in writing addressed to the owner trustee or indenture trustee, as
applicable.
Within a reasonable period of time after the end of each calendar
year during the term of each trust, but not later than the latest date
permitted by law, the applicable owner trustee or indenture trustee and the
paying agent will furnish to each person who on any Record Date during that
calendar year was a registered securityholder a statement containing
relevant information for the purposes of preparing securityholder federal
income tax returns.
See "Material Federal Income Tax Consequences."
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes the material terms of (1) each sale
and servicing agreement pursuant to which a trust will purchase contracts
from the seller and the servicer will agree to service those contracts, (2)
each owner trust agreement pursuant to which a trust will be created and
certificates will be issued and (3) each administration agreement pursuant
to which AutoNation Financial Services or another party specified in the
related prospectus supplement will undertake specified administrative
duties with respect to a trust. Forms of the sale and servicing agreement,
the owner trust agreement and the administration agreement have been filed
as exhibits to the registration statement of which this prospectus is a
part. This summary does not purport to be complete and is subject to, and
qualified in its entirety by reference to, all the provisions of each
applicable sale and servicing agreement, owner trust agreement and
administration agreement and the related prospectus supplement.
SALE AND ASSIGNMENT OF THE CONTRACTS
Sale and Assignment by AutoNation Financial Services. Prior to the
issuance of a series of securities by the related trust, pursuant to a
receivables purchase agreement, AutoNation Financial Services will sell and
assign to the seller, without recourse, its entire interest in the
contracts of the related receivables pool, including its security interest
in the related financed motor vehicles, and any proceeds thereof.
Sale and Assignment by the Seller. Prior to the issuance of a series
of securities by the related trust, the seller will sell and assign to the
applicable owner trustee of that trust, without recourse, pursuant to a
sale and servicing agreement, the seller's entire interest in the contracts
and the proceeds thereof, including its security interests in the related
financed motor vehicles. Each contract will be identified in a schedule
appearing as an exhibit to the sale and servicing agreement. The applicable
owner trustee of the trust will not independently verify the existence and
qualification of any contracts. The owner trustee or indenture trustee in
respect of the trust will, concurrently with the sale and assignment,
execute, authenticate and deliver the definitive notes and/or certificates
representing the related securities.
Use of Proceeds. The net proceeds received from the sale of the
securities of a given series will be applied to the purchase of the related
contracts from the seller and, to the extent specified in the related
prospectus supplement, to make the required initial deposit into any
reserve fund, spread account or with respect to any other credit or
liquidity enhancement.
Representations and Warranties of the Seller. Pursuant to each sale
and servicing agreement, the seller will represent to the applicable owner
trustee and the trust for the benefit of holders of the securities and any
applicable insurer that:
(1) each contract to be included in the Trust Property of a
trust contains customary and enforceable provisions such that the
rights and remedies of the holder thereof shall be adequate for
realization against the collateral of the benefits of the security;
(2) each contract and the sale of the related financed motor
vehicle at the time it was made complied in all material respects
with all requirements of applicable federal, state and local laws and
regulations thereunder, including usury laws, the Federal
Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair
Credit Reporting Act, the Federal Trade Commission Act, the Fair Debt
Collection Practices Act, the Fair Credit Billing Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B
and Z, the Soldiers' and Sailors' Civil Relief Act of 1940, state
adaptations of the National Consumer Act and of the Uniform Consumer
Credit Code, and any other consumer credit, equal opportunity and
disclosure laws applicable to that contract and sale;
(3) each contract constitutes the legal, valid and binding
payment obligation in writing of the obligor, enforceable by the
holder thereof in all respects in accordance with its terms, subject,
as to enforcement, to applicable bankruptcy, insolvency,
reorganization, liquidation and other similar laws and equitable
principles relating to or affecting the enforcement of creditors'
rights generally;
(4) as of the Closing Date, each contract was secured by a
validly perfected first priority security interest in the financed
motor vehicle in favor of the seller as secured party or all
necessary action with respect to the contract has been taken to
perfect a first priority security interest in the related financed
motor vehicle in favor of the seller as secured party, which security
interest, in either case, is assignable and has been so assigned by
the seller to the trust;
(5) as of the Closing Date, the seller had good and marketable
title to and was the sole owner of each contract free of liens,
claims, encumbrances and rights of others;
(6) as of the Closing Date, there are no rights of rescission,
offset, claim, counterclaim or defense, and the seller has no
knowledge of the same being asserted or threatened, with respect to
any contract;
(7) as of the Cut-Off Date, the seller has not received notice
that any obligor under a contract has filed for bankruptcy, and to
the best of the seller's knowledge without any independent
investigation, no obligor under a contract is in bankruptcy or
similar proceedings;
(8) as of the Closing Date, the seller has no knowledge that a
default, breach, violation or event permitting acceleration under the
terms of any contract exists, and the seller has no knowledge that a
continuing condition that with notice or lapse of time would
constitute a default, breach, violation or event permitting
acceleration under the terms of any contract exists, and the seller
has not waived any of the foregoing;
(9) each contract requires that the obligor thereunder obtain
comprehensive and collision insurance covering the financed motor
vehicle;
(10) each contract was originated by AutoNation Financial
Services;
(11) no adverse selection procedures were utilized in selecting
the contracts;
(12) scheduled payments under each contract have been applied
in accordance with the method for allocating principal and interest
set forth in the contract (the Simple Interest Method);
(13) there is only one original of each contract in existence,
and the original is being held by the servicer or its agent on behalf
of the trust and any applicable insurer; and
(14) each contract and/or the seller satisfies any additional
conditions or requirements set forth in the related prospectus
supplement, as applicable.
As of the last day of the Collection Period following the Collection
Period (or, if the seller elects, the last day of the Collection Period)
during which the seller becomes aware or receives written notice from the
applicable owner trustee or the servicer that a contract does not meet any
of the criteria required by the sale and servicing agreement, and the
failure materially and adversely affects the interests of the trust, the
securityholders or any applicable insurer in the contract, the seller,
unless it cures the failed criterion, will repurchase the contract from the
applicable owner trustee at the price specified in the related prospectus
supplement and, if applicable, all amounts due to any applicable insurer.
The repurchase obligation will constitute the sole remedy available to the
securityholders or the applicable owner trustee for the failure of a
contract to meet any of the criteria set forth in the sale and servicing
agreement.
THE COLLECTION ACCOUNT AND ELIGIBLE INVESTMENTS
With respect to each trust, the servicer or the indenture trustee
will establish and maintain one or more accounts, known collectively as the
collection account, in the name of the related indenture trustee on behalf
of the related noteholders and certificateholders into which all payments
made on or with respect to the related contracts will be deposited. Funds
in the collection account will be invested in Eligible Investments by the
indenture trustee, acting at the direction of the servicer. Eligible
Investments are limited to investments acceptable to each rating agency
rating the applicable securities and which are consistent with the rating
of those securities. Eligible Investments made with respect to the
collection account will mature no later than the business day immediately
preceding the next following Distribution Date and income from amounts on
deposit in the collection account which are invested in Eligible
Investments will be paid to the servicer monthly unless otherwise directed
by the servicer.
OTHER ACCOUNTS
Any other Trust Accounts to be established with respect to a trust
will be described in the related prospectus supplement. For any series of
securities, funds in any related reserve fund or any other Trust Accounts
as may be identified in the related prospectus supplement will be invested
in Eligible Investments as provided in the related sale and servicing
agreement or indenture.
PAYMENTS ON CONTRACTS
With respect to each trust, all collections on the contracts will be
deposited into or credited to the collection account by the servicer within
two business days of the receipt of payments from obligors or as specified
in the related prospectus supplement. Those collections will include the
following:
(1) amounts received with respect to the contracts in the
related Collection Period representing monthly principal and interest
payments;
(2) full and partial prepayments;
(3) Net Liquidation Proceeds and Net Insurance Proceeds;
(4) any amounts deposited by AutoNation Financial Services or
the seller, as applicable, in the collection account to purchase or
repurchase contracts because of material defects in documents related
to the contracts or breaches of representations or warranties
regarding the contracts made by AutoNation Financial Services in the
receivables purchase agreement or the seller in the sale and
servicing agreement that materially and adversely affect the
interests of the securityholders, the applicable trust or any
applicable insurer;
(5) any amounts deposited by the servicer in the collection
account to purchase contracts as to which the servicer has breached
its servicing covenants in a manner that materially and adversely
affect the interests of the securityholders, the applicable trust or
any applicable insurer;
(6) any amounts deposited by the servicer into the collection
account as a result of that entity exercising its right under limited
circumstances to purchase all or a portion of the contracts; and
(7) any other amounts specified in the related prospectus
supplement.
PAYMENTS AND DISTRIBUTIONS ON THE SECURITIES
With respect to each series of securities, beginning on the
Distribution Date specified in the related prospectus supplement, payments
and distributions of principal of and interest on (or, where applicable, of
principal or interest only) each class of securities entitled thereto will
be made by the applicable indenture trustee to the noteholders and by the
applicable owner trustee to the certificateholders of that series. The
timing, calculation, allocation, order, source, priorities of and
requirements for all payments and distributions to each class of securities
of the series will be set forth in the related prospectus supplement.
With respect to each trust, on each Distribution Date collections on
the related contracts will be withdrawn from the related collection account
and will be paid and distributed to the securityholders as provided in the
related prospectus supplement. Credit enhancement will be available to
cover any shortfalls in the amount available for payment or distribution to
the securityholders on that Distribution Date to the extent specified in
the related prospectus supplement. If specified in the related prospectus
supplement, payments or distributions in respect of one or more classes of
securities of the applicable series may be subordinate to payments or
distributions in respect of one or more other classes of securities of that
series.
CREDIT AND CASH FLOW ENHANCEMENT
The amounts and types of credit and cash flow enhancement
arrangements, if any, and the provider thereof, if applicable, with respect
to each class of securities of a given series, will be set forth in the
related prospectus supplement. If and to the extent provided in the related
prospectus supplement, credit and cash flow enhancement with respect to a
trust or any class or classes of securities may include any one or more of
the following: a surety bond or financial guarantee insurance policy
provided by a third-party insurer, subordination of one or more classes of
securities to one or more other classes of securities, a reserve fund, a
spread account, a yield maintenance account, overcollateralization, letters
of credit, credit or liquidity facilities, guaranteed investment contracts,
swaps or other interest rate protection agreements, repurchase obligations,
cash deposits, other agreements or arrangements with respect to third party
payments, or other support as may be described in the related prospectus
supplement or any combination of the foregoing. If specified in the
applicable prospectus supplement, credit or cash flow enhancement for a
class of securities may cover one or more other classes of securities of
the same series, and credit or cash flow enhancement for a series of
securities may cover one or more other series of securities.
The presence of credit enhancement for the benefit of any class or
series of securities is intended to enhance the likelihood of receipt by
the securityholders of that class or series of the full amount of principal
and interest due thereon and to decrease the likelihood that those
securityholders will experience losses. Any form of credit enhancement will
have limitations and exclusions from coverage thereunder, which will be
described in the related prospectus supplement. The credit enhancement for
a class or series of securities will not provide protection against all
risks of loss and may not guarantee repayment of the entire principal
balance and interest thereon. If losses occur which exceed the amount
covered by any credit enhancement or which are not covered by any credit
enhancement, securityholders of any class or series will bear an allocable
share of deficiencies, as described in the related prospectus supplement.
In addition, if a form of credit enhancement covers more than one class or
series of securities, securityholders of any given class will be subject to
the risk that the credit enhancement will be exhausted by the claims of
securityholders of other classes or series.
INSURANCE ON FINANCED MOTOR VEHICLES
Each obligor on a contract will be required to maintain insurance
covering physical damage to the obligor's financed motor vehicle in an
amount not less than the lesser of its maximum insurable value or the
unpaid principal balance under the contract. AutoNation Financial Services
will be required to be named as loss payee under the policy of insurance
obtained by the obligor. Each financed motor vehicle will be required to be
insured against loss and damage due to fire, theft, transportation,
collision and other risks covered by comprehensive coverage. Since obligors
may choose their own insurers to provide the required coverage, the
specific terms and conditions of their policies vary.
SERVICER REPORTS TO THE TRUSTEES AND THE INSURER
The servicer will perform monitoring and reporting functions for the
applicable indenture trustee, owner trustee and any insurer, including the
preparation and delivery on a specified periodic date set forth in the
related sale and servicing agreement of a statement setting forth the
amounts on deposit in the collection account, the sources of those amounts
and the amounts to be paid to securityholders. The statement will also
include information regarding the contracts, including the number and
outstanding principal balance of all Defaulted Contracts and the number of
contracts purchased by the servicer or repurchased by the seller.
OPTIONAL PURCHASE OF CONTRACTS
Each sale and servicing agreement will provide that the servicer will
have the option to purchase the remaining contracts included in the Trust
Property of a trust on any Distribution Date as of which the related Pool
Balance (after giving effect to the principal payments and distributions
otherwise to be made on that Distribution Date) has declined to the
percentage of the Original Pool Balance specified in the related prospectus
supplement. Any optional purchase must be effected at the price specified
in the related prospectus supplement, if applicable, plus all amounts due
to any applicable insurer. In addition, AutoNation Financial Services or
the seller will be required to purchase or repurchase, respectively,
contracts in the event that specified representations and warranties
regarding the contracts made by AutoNation Financial Services or the
seller, respectively, are incorrect in any manner that materially and
adversely affects the interest therein of the securityholders, the
applicable trust or any applicable insurer. Additionally, the servicer will
be required to purchase contracts as to which the servicer has breached its
servicing covenants in any manner that materially and adversely affects the
interest of the securityholders, the applicable trust or any applicable
insurer.
SERVICING FEE
The servicer will be entitled to compensation for the performance of
its obligations under each sale and servicing agreement. If specified in
the related prospectus supplement, the servicer will be entitled to receive
on each Distribution Date a servicing fee in an amount equal to the product
of (1) one-twelfth of a specified percentage per annum (as set forth in the
related prospectus supplement) multiplied by (2) the Pool Balance as of the
end of the Collection Period preceding the related Collection Period or, in
the case of the first Distribution Date, the Original Pool Balance. If
specified in the related prospectus supplement, the servicer or its
designee shall be entitled to retain, as additional compensation, all late
payment charges, extension fees and similar items paid in respect of the
contracts. The servicer or its designee may also be entitled to receive, as
servicing compensation, reinvestment earnings on Eligible Investments. The
servicer shall pay all expenses incurred by it in connection with its
servicing activities under the sale and servicing agreement and will not be
entitled to reimbursement of its expenses except to the extent they
constitute Liquidation Expenses or expenses recoverable under an applicable
insurance policy.
WAIVERS AND EXTENSIONS
Each sale and servicing agreement will require the servicer to use
its best efforts to collect all payments called for and due under the terms
and provisions of the related contracts held by each trust. Subject to any
limitations set forth in the related prospectus supplement, the servicer,
consistent with its normal procedures, will be permitted, in its
discretion, to (1) waive any late payment charges in connection with
delinquent payments on a contract, (2) waive any prepayment charges, (3)
grant an extension in order to work out a default or an impending default;
provided that, with a few very limited exceptions, there have been no more
than two extensions of the related contract in the last twelve months and
the sum of the terms of all extensions of the contract does not exceed six
months or (4) take any other action specified in the related prospectus
supplement.
REALIZATION UPON DEFAULTED CONTRACTS
The servicer will liquidate any contract with respect to which a
default has occurred and such contract continues to be in default and as to
which no satisfactory arrangements can be made for collection of delinquent
payments. A liquidation may occur through repossession or sale of the
financed motor vehicle securing the applicable contract or otherwise. In
connection with a repossession or other conversion, the servicer will
follow the normal and usual procedures adopted by holders of motor vehicle
retail installment sales contracts. In this regard, the servicer may sell
the financed motor vehicle at an auction or other public or private sale,
and may take any other action permitted by applicable law.
EVIDENCE AS TO COMPLIANCE
Each sale and servicing agreement will provide that a firm of
independent public accountants will annually furnish to the related owner
trustee, indenture trustee and, if applicable, the related insurer, a
statement as to compliance by the servicer during the preceding twelve
months (or, in the case of the first statement, from the applicable Closing
Date) with specified standards relating to the servicing of the applicable
contracts, the servicer's accounting records and computer files with
respect thereto and other matters.
Each sale and servicing agreement will also provide for annual
delivery to the related owner trustee, indenture trustee and, if
applicable, the related insurer, of a certificate signed by an authorized
officer of the servicer stating that the servicer has fulfilled its
obligations under the sale and servicing agreement throughout the preceding
twelve months (or, in the case of the first certificate, from the Closing
Date) or, if there has been a default in the fulfillment of any obligation,
describing the default. The servicer will also give the related owner
trustee, indenture trustee and, if applicable, the related insurer, notice
of any events of termination of the servicer under the related sale and
servicing agreement.
Copies of the statements and certificates described above may be
obtained by securityholders by a request in writing addressed to the
applicable owner trustee or indenture trustee.
MATERIAL MATTERS REGARDING THE SERVICER
Each sale and servicing agreement will provide that the servicer may
not resign from its obligations and duties as servicer thereunder except
upon determination that the servicer's performance of its duties is no
longer permissible under applicable law. No resignation of the servicer
will become effective until the related owner trustee, indenture trustee or
a successor servicer has assumed the servicer's servicing obligations and
duties under the sale and servicing agreement. See "-The Owner Trustee and
Indenture Trustee."
Each sale and servicing agreement will further provide that neither
the servicer nor any of its directors, officers, employees and agents will
be under any liability to the related trust or the related securityholders
for taking any action or for refraining from taking any action pursuant to
the sale and servicing agreement or for errors in judgment; provided,
however, that neither the servicer nor any other person described above
will be protected against any liability that would otherwise be imposed by
reason of willful misfeasance, bad faith or negligence in the performance
of duties or by reason of reckless disregard of obligations and duties
thereunder. In addition, the sale and servicing agreement will provide that
the servicer is under no obligation to appear in, prosecute or defend any
legal action that is not incidental to the servicer's servicing
responsibilities under the sale and servicing agreement and that, in its
opinion, may cause it to incur any expense or liability. The servicer may,
however, undertake any reasonable action that it may deem necessary or
desirable in respect of the sale and servicing agreement and the rights and
duties of the parties thereto and the interests of the securityholders
thereunder. Any indemnification or reimbursement of the servicer could
reduce the amount otherwise available for distribution to securityholders.
Any corporation into which the servicer may be merged or
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the servicer is a party or any corporation
succeeding to the business of the servicer, or, with respect to the
servicer's obligation as the servicer, will be the successor of the
servicer under the sale and servicing agreement.
DEFAULTS BY THE SERVICER
A default by the servicer under the sale and servicing agreement may
include any of the following:
(1) any failure by the servicer to deposit in or credit to the
collection account any amount required to be so deposited or
credited, which failure continues unremedied for three business days
after discovery by the servicer or receipt by the servicer of written
notice from the applicable owner trustee or indenture trustee, or, if
applicable, the related insurer;
(2) any failure by the servicer or the seller duly to observe
or perform in any material respect any other covenants or agreements
of the servicer or the seller in the sale and servicing agreement,
which failure materially and adversely affects the rights of
securityholders or the applicable owner trustee or indenture trustee,
or, if applicable, the related insurer, and which continues
unremedied for 30 days after the seller, the trust or the servicer
has knowledge of the failure or the giving of written notice of the
failure (A) to the servicer or the seller, as the case may be, by the
applicable owner trustee or indenture trustee, or, if applicable, the
related insurer or (B) to the servicer or the seller, as the case may
be, and to the applicable owner trustee or indenture trustee by
holders of securities evidencing not less than 25% in principal
amount of those securities, acting together as a single class, or, if
applicable, the related insurer;
(3) specified events of insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings and
actions by the servicer or seller indicating its insolvency,
reorganization pursuant to bankruptcy or similar proceedings or
inability to pay its obligations as they become due;
(4) any breach of any of the representations and warranties of
the servicer or the seller (except for any breaches relating to
contracts repurchased by the seller or the servicer) which breach has
a material adverse effect on the related securityholders or, if
applicable, the related insurer and which continues for 30 days after
the giving of notice of the breach to the seller or the servicer, as
the case may be, by the applicable owner trustee or indenture trustee
or the holders of securities evidencing not less than 25% in
principal amount of those securities, acting together as a single
class, or, if applicable, the related insurer;
(5) if applicable, the reasonable determination by the insurer
that the quality of performance of the servicer is not in compliance
with either the terms of the sale and servicing agreement or that the
servicer's performance is not adequate, as measured in accordance
with industry standards, in respect of all motor vehicle contracts
serviced by the servicer; and
(6) any other event specified in the related prospectus supplement.
RIGHTS UPON DEFAULT BY THE SERVICER
Matters relating to the termination of the related servicer's rights
and obligations and the waiver of any defaults by the related servicer
under the related sale and servicing agreement will be as described in the
accompanying prospectus supplement under "Description of the Transfer and
Servicing Agreements - Default by the Servicer; Rights Upon Default by the
Servicer."
Obligations of the Owner Trustee or Indenture Trustee. With respect
to each trust, the applicable owner trustee or indenture trustee will be
under no obligation to exercise any of the trusts or powers vested in it by
the sale and servicing agreement or to make any investigation of matters
arising thereunder or to institute, conduct or defend any litigation
thereunder or in relation thereto at the request, order or direction of any
of the securityholders, unless those securityholders have offered to the
owner trustee or indenture trustee reasonable security or indemnity against
the costs, expenses and liabilities which may be incurred therein or
thereby. No securityholder will have any right under the sale and servicing
agreement to institute any proceeding with respect thereto, unless the
securityholder previously has given to the owner trustee or indenture
trustee, as applicable, written notice of default and unless (1) holders of
notes of the related series evidencing not less than 25% of the principal
amount of those notes then outstanding and (2) holders of certificates of
the related series evidencing not less than 25% of the principal amount of
those certificates then outstanding, in either case with the consent of the
related insurer, if any, have made written request upon the owner trustee
or indenture trustee to institute a proceeding in its own name as owner
trustee or indenture trustee thereunder and have offered to the owner
trustee or indenture trustee reasonable indemnity and the owner trustee or
indenture trustee for 30 days has neglected or refused to institute any
proceedings.
AMENDMENT
Each of the sale and servicing agreement, the owner trust agreement
and the administration agreement may be amended by the parties thereto with
the consent of the related insurer, if any, but without the consent of the
related securityholders, to cure any ambiguity, correct or supplement any
provisions therein which may be inconsistent with any other provisions
therein, or add any other provisions with respect to matters or questions
arising thereunder which are not inconsistent with the provisions of the
sale and servicing agreement, the owner trust agreement and the
administration agreement; provided that any action will not materially and
adversely affect the interest of any of the securityholders. Any amendment
will be deemed not to materially and adversely affect the interest of any
securityholder if the person requesting the amendment obtains (1) a letter
from each rating agency rating the applicable securities to the effect that
the amendment would not result in a downgrading or withdrawal of the
ratings then assigned to the applicable securities by that rating agency
and (2) the consent of the related insurer, if any.
The sale and servicing agreement, the owner trust agreement and the
administration agreement may also be amended by the parties thereto with
the consent of (1) subject to the rights, if any, of the applicable insurer
as described in the related prospectus supplement, the holders of notes of
the related series evidencing not less than a majority of the principal
amount of those notes then outstanding, acting together as a single class
and (2) in the case of the owner trust agreement, the holders of
certificates of the related series evidencing not less than a majority of
the principal amount of those certificates then outstanding, acting
together as a single class, and in either case with the consent of the
related insurer, if any, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the sale and
servicing agreement, the owner trust agreement or the administration
agreement or of modifying in any manner the rights of the related
noteholders or certificateholders; provided, however, that no amendment
may, without the consent of the holders of all the outstanding notes or
certificates, as the case may be, of that series (1) increase or reduce in
any manner the amount of, or accelerate or delay the timing of, collections
of payments on the related contracts or distributions that are required to
be made for the benefit of the noteholders or certificateholders, (2)
reduce the aforesaid percentage of the notes or certificates of any series
which are required to consent to any amendment or (3) result in a taxable
event to any of the securityholders for federal income tax purposes or
result in the trust being taxable as a corporation for federal income tax
purposes.
It is intended that the trust will not constitute a separate entity
for federal income tax purposes during the time that the seller holds the
entire equity interest in the trust; provided, however, that at any time
that equity interests in the trust are held by more than one holder, the
sale and servicing agreement, the owner trust agreement and the
administration agreement may be amended, as necessary and in accordance
with the preceding paragraph, to reflect the appropriate treatment of the
trust as a partnership for federal income tax purposes. See "Material
Federal Income Tax Consequences" below.
TERMINATION
With respect to each trust, the obligations of the seller, the
servicer, the related owner trustee and indenture trustee pursuant to the
sale and servicing agreement, the owner trust agreement and the
administration agreement will terminate upon the earlier of (1) the
maturity or other liquidation of the last related contract and the
disposition of any amounts received upon liquidation of any remaining
contracts or other assets that are part of the related Trust Property and
(2) (a) the payment to noteholders and certificateholders of the related
series of all amounts required to be paid to them pursuant to the sale and
servicing agreement, the owner trust agreement and the administration
agreement and the disposition of all property held as part of the related
trust, (b) if applicable, the termination of the related insurance policy
in accordance with its terms and the surrender of the insurance policy to
the related insurer for cancellation, (c) the payment of all amounts owed
to the owner trustee or indenture trustee under the sale and servicing
agreement, the owner trust agreement, the administration agreement and the
indenture and (d) if applicable, the payment of all amounts owed to the
related insurer in connection with the related insurance policy.
To the extent specified in the related prospectus supplement, in
order to avoid excessive administrative expense, the servicer will be
permitted at its option to purchase the remaining contracts included in the
Trust Property of a trust on any Distribution Date as of which the related
Pool Balance (after giving effect to the principal payments and
distributions otherwise to be made on that Distribution Date) has declined
to the percentage of the Original Pool Balance specified in the related
prospectus supplement at the price specified in the related prospectus
supplement. The applicable owner trustee or indenture trustee will give
written notice of termination to each securityholder of record. The final
payment or distribution to any securityholder will be made only upon
surrender and cancellation of the securityholder's security at an office or
agency of the applicable owner trustee or indenture trustee specified in
the notice of termination. The applicable owner trustee or indenture
trustee will return, or cause to be returned, any unclaimed funds to the
trust.
THE OWNER TRUSTEE AND INDENTURE TRUSTEE
With respect to each trust, neither the applicable owner trustee nor
the indenture trustee will make any representations as to the validity or
sufficiency of the related sale and servicing agreement, the related owner
trust agreement, the related administration agreement, the related
indenture, the securities or any related contracts or related documents. As
of the applicable Closing Date, neither the applicable owner trustee nor
the indenture trustee will have examined the contracts. If no event of
default has occurred under the indenture, the owner trustee and indenture
trustee will be required to perform only those duties specifically required
of it under the related sale and servicing agreement, the related owner
trust agreement, the related administration agreement or the related
indenture, as applicable. Generally, those duties are limited to the
receipt of the various certificates, reports or other instruments required
to be furnished to the owner trustee or indenture trustee under the related
sale and servicing agreement, the related owner trust agreement, the
related administration agreement or the related indenture, as applicable,
the making of payments or distributions to securityholders in the amounts
specified in certificates provided by the servicer and, if applicable,
drawing on the related insurance policy if required to make payments or
distributions to securityholders.
Each owner trustee and indenture trustee, and any of their
affiliates, may hold securities in their own names. In addition, for the
purpose of meeting the legal requirements of local jurisdictions, each
owner trustee and indenture trustee (in some circumstances, acting jointly
with the servicer) will have the power to appoint co-trustees or separate
trustees of all or any part of the related Trust Property. In the event of
the appointment of co-trustees or separate trustees, all rights, powers,
duties and obligations conferred or imposed upon the owner trustee or
indenture trustee by the related sale and servicing agreement, the related
owner trust agreement, the related administration agreement or the related
indenture, as applicable, will be conferred or imposed upon the owner
trustee or indenture trustee and the separate trustee or co-trustee
jointly, or, in any jurisdiction in which the owner trustee or indenture
trustee is incompetent or unqualified to perform specified acts, singly
upon the separate trustee or co- trustee who will exercise and perform any
rights, powers, duties and obligations solely at the direction of the owner
trustee or indenture trustee.
Each applicable owner trustee and indenture trustee may resign at any
time, in which event a successor trustee will be appointed pursuant to the
terms of the related sale and servicing agreement, the related owner trust
agreement, the related administration agreement or the related indenture,
as applicable. Each applicable owner trustee and indenture trustee may be
removed if it ceases to be eligible to continue in its capacity under the
related sale and servicing agreement, the related owner trust agreement,
the related administration agreement or the related indenture, as
applicable, or if the owner trustee or indenture trustee becomes insolvent.
Any resignation or removal of the owner trustee or indenture trustee and
appointment of a successor will not become effective until acceptance of
the appointment by the successor trustee. Each applicable owner trustee and
indenture trustee will be entitled to a fee which will be payable by the
servicer either on an annual basis or any other basis specified in the
related prospectus supplement. The related sale and servicing agreement,
the related owner trust agreement, the related administration agreement and
the related indenture, as applicable, will further provide that the owner
trustee and indenture trustee will be entitled to indemnification by the
servicer for, and will be held harmless against, any loss, liability or
expense incurred by the owner trustee or indenture trustee not resulting
from the owner trustee's or indenture trustee's own willful misfeasance,
bad faith or negligence or by reason of breach of any of their respective
representations or warranties set forth in the related sale and servicing
agreement, the related owner trust agreement, the related administration
agreement or the related indenture, as applicable.
AutoNation Financial Services may maintain other banking
relationships with each applicable owner trustee and indenture trustee in
the ordinary course of business.
DESCRIPTION OF THE ADMINISTRATION AGREEMENT
AutoNation Financial Services or another party specified in the
related prospectus supplement, in its capacity as administrator, may enter
into an administration agreement, which may be amended and supplemented
from time to time, with the trust and the related indenture trustee
pursuant to which the administrator will agree, to the extent provided in
the administration agreement, to provide the notices and to perform other
administrative obligations required by the related indenture. With respect
to any trust, as compensation for the performance of the administrator's
obligations under the applicable administration agreement and as
reimbursement for its expenses related thereto, the administrator will be
entitled to a monthly administration fee in an amount to be set forth in
the related prospectus supplement. Any administration fee will be paid by
the servicer.
DESCRIPTION OF THE INDENTURE
The following summary describes some of the terms of each indenture
pursuant to which the notes of a series will be issued. A form of indenture
has been filed as an exhibit to the registration statement of which this
prospectus is a part. This summary does not purport to be complete and is
subject to, and qualified in its entirety by reference to, all the
provisions of each applicable indenture and the related prospectus
supplement.
MODIFICATION OF INDENTURE
The trust and the indenture trustee may, subject to the rights, if
any, of the applicable insurer described in the related prospectus
supplement, and, if so specified in the related prospectus supplement, with
the consent of the noteholders of the related series evidencing not less
than a majority of the principal amount of those notes then outstanding
acting as a single class, and with the consent of the related insurer, if
any, execute a supplemental indenture for the purpose of adding provisions
to, changing in any manner or eliminating any provisions of, the related
indenture, or modifying (except as provided below) in any manner the rights
of the related noteholders.
With respect to the notes of a given series, without the consent of
the holder of each outstanding note affected thereby, no supplemental
indenture will:
(1) change the due date of any installment of principal of, or
interest on, any note or reduce the principal amount thereof, the
interest rate specified thereon or the redemption price with respect
thereto or change any place of payment or the coin or currency in
which any note or any interest thereon is payable;
(2) impair the right to institute suit for the enforcement of
specified provisions of the related indenture regarding payment;
(3) reduce the percentage of the aggregate amount of the
outstanding notes of the series, the consent of the holders of which
is required for any supplemental indenture or the consent of the
holders of which is required for any waiver of compliance with
specified provisions of the related indenture or of defaults
thereunder and their consequences as provided for in the indenture;
(4) modify or alter the provisions of the related indenture
regarding the voting of notes held by the applicable trust, any other
obligor on the notes, the seller or an affiliate of any of them;
(5) reduce the percentage of the aggregate outstanding amount of
the notes, the consent of the holders of which is required to direct
the related indenture trustee to sell or liquidate the contracts if
the proceeds of the sale would be insufficient to pay the principal
amount and accrued but unpaid interest on the outstanding notes of the
series;
(6) decrease the percentage of the aggregate principal amount of
the notes required to amend the sections of the related indenture
which specify the applicable percentage of aggregate principal amount
of the notes of the series necessary to amend the indenture or the
other related agreements;
(7) permit the creation of any lien ranking prior to or pari
passu with the lien of the related indenture with respect to any of
the collateral for the notes or, except as otherwise permitted or
contemplated in the indenture, terminate the lien of the indenture on
any collateral or deprive the holder of any note of the security
afforded by the lien of the indenture;
(8) result in a taxable event to any noteholder for federal
income tax purposes or result in the trust being taxable as a
corporation for federal income tax purposes; or
(9) to the extent provided in the related prospectus supplement,
add provisions to, change in any manner or eliminate any provisions
of, the related indenture, or modify in any manner the rights of the
related noteholders, relating to any other matters specified in the
related prospectus supplement.
The related trust and the applicable indenture trustee may also enter
into supplemental indentures, without obtaining the consent of the
noteholders of the related series but with the consent of the related
insurer, if any, for the purpose of, among other things, adding any
provisions to or changing in any manner or eliminating any of the
provisions of the related indenture or of modifying in any manner the
rights of those noteholders; provided that (1) the action will not (A) as
evidenced by an opinion of counsel, materially and adversely affect the
interest of any noteholder or (B) as confirmed by each rating agency rating
the notes of the related series, cause the then current rating assigned to
any class of notes to be withdrawn or reduced and (2) an opinion of counsel
as to applicable tax matters is delivered.
EVENTS OF DEFAULT UNDER THE INDENTURE; RIGHTS UPON EVENT OF DEFAULT
With respect to the notes of a given series, an event of default
under the related indenture may consist of:
(1) a default for five days or more in the payment of any
interest on any note of that series;
(2) a default in the payment of the principal of, or any
installment of the principal of, any note of that series when the same
becomes due and payable;
(3) a default in the observance or performance of any covenant or
agreement of the applicable trust made in the related indenture and
the continuation of any default for a period of 30 days after notice
thereof is given to the trust by the applicable indenture trustee or,
if applicable, the related insurer, or to the trust and the indenture
trustee by the holders of at least 25% of the principal amount of the
notes of that series then outstanding acting together as a single
class;
(4) any representation or warranty made by the trust in the
related indenture or in any certificate delivered pursuant thereto or
in connection therewith was incorrect in any material respect as of
the time made, and that breach has not been cured within 30 days after
notice thereof is given to the trust by the applicable indenture
trustee or, if applicable, the related insurer, or to the trust, the
related insurer, if any, and the indenture trustee by the holders of
at least 25% of the principal amount of the notes of that series then
outstanding acting together as a single class;
(5) specified events of bankruptcy, insolvency, receivership or
liquidation of the applicable trust; or
(6) other events, if any, set forth in the related prospectus
supplement.
The failure to pay principal on a class of notes generally will not result
in the occurrence of an event of default under the indenture until the
final scheduled Distribution Date for that class of notes.
With respect to each series that includes notes, the rights and
remedies of the related indenture trustee, the related holders of the notes
and the related insurer, if any, will be described in the related
prospectus supplement.
MATERIAL COVENANTS
Each indenture will provide that the related trust may not
consolidate with or merge into any other entity, unless:
(1) the entity formed by or surviving any consolidation or merger
is organized under the laws of the United States, any state thereof or
the District of Columbia;
(2) the entity expressly assumes the trust's obligation to make
due and punctual payments on the notes of the related series and the
performance or observance of every agreement and covenant of the trust
under the indenture;
(3) no event of default under the indenture shall have occurred
and be continuing immediately after the merger or consolidation;
(4) the trust has been advised that the ratings of the securities
of the applicable series then in effect would not be reduced or
withdrawn by any rating agency as a result of the merger or
consolidation;
(5) the trust has received an opinion of counsel to the effect
that the consolidation or merger would have no material adverse tax
consequence to the trust or to any holder of the securities of the
trust; and
(6) any other conditions specified in the related prospectus
supplement have been satisfied.
Additionally, the related indenture will provide that each trust will not,
among other things:
(1) except as expressly permitted by the applicable indenture,
the applicable sale and servicing agreement, the applicable owner
trust agreement, the applicable administration agreement or the other
related documents with respect to the trust, sell, transfer, exchange
or otherwise dispose of any of the assets of the trust;
(2) claim any credit on or make any deduction from the principal
and interest payable in respect of the notes of the related series
(other than amounts withheld under the Code of 1986, as amended, or
applicable state law) or assert any claim against any present or
former holder of the notes because of the payment of taxes levied or
assessed upon the trust;
(3) dissolve or liquidate in whole or in part;
(4) permit the validity or effectiveness of the related indenture
to be impaired or permit any person to be released from any covenants
or obligations with respect to the notes under the indenture except as
may be expressly permitted thereby;
(5) permit any lien, charge, excise, claim, security interest,
mortgage or other encumbrance to be created on or extend to or
otherwise arise upon or burden the assets of the trust or any part
thereof, or any interest therein or the proceeds thereof; or
(6) incur, assume or guarantee any indebtedness other than
indebtedness incurred pursuant to the related notes and the related
indenture, or otherwise in accordance with the related documents with
respect to the trust.
ANNUAL COMPLIANCE STATEMENT
Each trust will be required to file annually with the related
indenture trustee a written statement as to the fulfillment of its
obligations under the indenture.
INDENTURE TRUSTEE'S ANNUAL REPORT
The indenture trustee for each trust will be required to mail each
year to all related noteholders a brief report setting forth the following:
(1) its eligibility and qualification to continue as indenture
trustee under the related indenture;
(2) if the related indenture requires the indenture trustee to
make advances, any amount advanced by it under the indenture;
(3) the amount, interest rate and maturity date of any
indebtedness owing by the trust to the applicable indenture trustee in
its individual capacity;
(4) the property and funds physically held by the indenture
trustee in its capacity as indenture trustee; and
(5) any action taken by it that materially affects the related
notes and that has not been previously reported.
SATISFACTION AND DISCHARGE OF INDENTURE
An indenture will be discharged with respect to the collateral
securing the related notes upon the delivery to the related indenture
trustee for cancellation of all the related notes or, subject to specified
limitations, upon deposit with the indenture trustee of funds sufficient
for the payment in full of all of the notes.
THE INDENTURE TRUSTEE
Additional matters relating to the indenture trustee are described
under "Description of the Transfer and Servicing Agreements - The Owner
Trustee and Indenture Trustee."
LEGAL ASPECTS OF THE CONTRACTS
The transfer of the contracts by AutoNation Financial Services to the
seller, and by the seller to the applicable trust, and the pledge thereof
to an indenture trustee, the perfection of the security interests in the
contracts and the enforcement of rights to realize on the related financed
motor vehicles as collateral for the contracts are subject to a number of
federal and state laws, including the Uniform Commercial Code as in effect
in various states. The servicer and the seller will take the actions
described below to perfect the rights of the applicable owner trustee and
the indenture trustee in the contracts.
Under each sale and servicing agreement or indenture, as applicable,
the applicable owner trustee or indenture trustee initially will have
custody of the contracts included in the Trust Property of a trust
following the sale of the contracts to the related trust and the pledge
thereof to the related indenture trustee, and will hold the contracts as
bailee for the benefit of the trust or as secured party. The servicer or a
subservicer may be appointed by the applicable owner trustee or indenture
trustee to act as the custodian of the contracts. Upon the appointment of
the servicer or a subservicer as the custodian, physical possession of the
contracts will shift from the owner trustee or indenture trustee to the
servicer or the subservicer, as applicable. While the contracts will not be
physically marked to indicate the ownership interest thereof by the trust,
appropriate UCC-1 financing statements reflecting the sale and assignment
of the contracts by AutoNation Financial Services to the seller and by the
seller to the trust will be filed to perfect that interest and give notice
of the trust's ownership interest in, and the indenture trustee's security
interest in, the contracts. If, through inadvertence or otherwise, any of
the contracts were sold to another party who purchased the contracts in the
ordinary course of its business and took possession of the contracts, the
purchaser would acquire an interest in the contracts superior to the
interests of the trust and the indenture trustee if the purchaser acquired
the contracts in good faith, for value and without actual knowledge of the
trust's and the indenture trustee's interests in the contracts.
SECURITY INTERESTS IN THE FINANCED MOTOR VEHICLES
Obtaining Security Interests in Financed Motor Vehicles. In all
states in which the contracts have been originated, retail installment
sales contracts such as the contracts evidence the credit sale of
automobiles and/or light-duty trucks by dealers to consumers. The contracts
also constitute personal property security agreements and include grants of
security interests in the vehicles under the applicable Uniform Commercial
Code. Perfection of security interests in the vehicles is generally
governed by the motor vehicle registration laws of the state in which the
vehicle is located. In most states, a security interest in an automobile or
a light-duty truck is perfected by obtaining the certificate of title to
the financed motor vehicle or notation of the secured party's lien on the
vehicle's certificate of title. The seller will warrant to the related
trust in the sale and servicing agreement that AutoNation Financial
Services has taken all steps necessary to obtain a perfected first priority
security interest with respect to all financed motor vehicles securing the
contracts and that the security interest has been assigned to the trust. If
AutoNation Financial Services fails, because of clerical errors or
otherwise, to effect or maintain the notation of the security interest on
the certificate of title relating to a financed motor vehicle, the trust
may not have a first priority security interest in that financed motor
vehicle.
Perfection of Security Interests in Financed Motor Vehicles. The
seller will sell the contracts and assign the security interest in each
financed motor vehicle to the related trust. However, because of the
administrative burden and expense, the servicer, the seller and the trust
will not amend any certificate of title to identify the trust as the new
secured party on the certificates of title relating to the financed motor
vehicles. Accordingly, AutoNation Financial Services will continue to be
named as the secured party on the certificates of title relating to the
financed motor vehicles. In most states, assignments such as those under
the receivables purchase agreement and the sale and servicing agreement
relating to each trust, together with a perfected security interest in the
related financed vehicles, is an effective conveyance of the security
interests in the financed vehicles without amendment of the lien noted on
the related certificate of title, and the new secured party succeeds to the
assignor's rights as the secured party. However, there exists a risk in not
identifying the related trust as the new secured party on the certificate
of title that, through fraud or negligence, the security interest of the
trust could be released or primed.
In the absence of fraud or forgery by the financed motor vehicle
owner or administrative error by state recording officials, notation of the
lien of AutoNation Financial Services will be sufficient to protect the
related trust against the rights of subsequent purchasers of a financed
motor vehicle or subsequent lenders who take a security interest in a
financed motor vehicle. If there are any financed motor vehicles as to
which AutoNation Financial Services has failed to perfect the security
interest assigned to the related trust, that security interest would be
subordinate to, among others, subsequent purchasers of the financed motor
vehicles and holders of perfected security interests.
Under the laws of most states, the perfected security interest in a
financed motor vehicle would continue for four months after a vehicle is
moved to a state other than the state in which it is initially registered
and thereafter until the vehicle owner re-registers the vehicle in the new
state. A majority of states require surrender of a certificate of title to
re-register a vehicle. Therefore, the servicer will provide the department
of motor vehicles or other appropriate state or county agency of the state
of relocation with the certificate of title so that the owner can effect
the re-registration. If the financed motor vehicle owner moves to a state
that provides for notation of a lien on the certificate of title to perfect
the security interests in the financed motor vehicle, absent clerical
errors or fraud, AutoNation Financial Services would receive notice of
surrender of the certificate of title if its lien is noted thereon.
Accordingly, the secured party will have notice and the opportunity to
re-perfect the security interest in the financed motor vehicle in the state
of relocation. If the financed motor vehicle owner moves to a state which
does not require surrender of a certificate of title for registration of a
motor vehicle, re-registration could defeat perfection. In the ordinary
course of servicing its portfolio of motor vehicle installment sales
contracts, AutoNation Financial Services takes steps to effect
re-perfection upon receipt of notice of registration or information from
the obligor as to relocation. Similarly, when an obligor under a contract
sells a financed motor vehicle, the servicer must provide the owner with
the certificate of title, or the servicer will receive notice as a result
of its lien noted thereon and accordingly will have an opportunity to
require satisfaction of the related contract before release of the lien.
Under each sale and servicing agreement, the servicer, at its expense, will
be obligated to take appropriate steps to maintain the continuous
perfection of the security interest of AutoNation Financial Services in the
financed motor vehicle.
Under the laws of most states, statutory liens such as liens for
unpaid taxes, liens for towing, storage and repairs performed on a motor
vehicle, motor vehicle accident liens and liens arising under various state
and federal criminal statutes take priority over a perfected security
interest in a financed motor vehicle. The Code also grants priority to
federal tax liens over the lien of a secured party. The laws of most states
and federal law permit the confiscation of motor vehicles by governmental
authorities under some circumstances if used in or acquired with the
proceeds of unlawful activities, which may result in the loss of a secured
party's perfected security interest in a confiscated vehicle. With respect
to each trust, the seller will represent in each sale and servicing
agreement that, as of the initial issuance of the securities of the related
series, no state or federal liens exist with respect to any financed motor
vehicle securing payment on any related contract. However, liens could
arise, or a confiscation could occur, at any time during the term of a
contract. It is possible that no notice will be given to the servicer in
the event that a lien arises or a confiscation occurs, and any lien arising
or confiscation occurring after the related Closing Date would not give
rise to the seller's repurchase obligations under the related sale and
servicing agreement.
REPOSSESSION
In the event of a default by an obligor, the holder of the related
retail installment sales contract has all the remedies of a secured party
under the Uniform Commercial Code, except as specifically limited by other
state laws. Among the Uniform Commercial Code remedies, the secured party
has the right to repossess a financed vehicle by self-help means, unless
that means would constitute a breach of the peace or is otherwise limited
by applicable state law. Unless a financed vehicle is voluntarily
surrendered, self-help repossession is accomplished simply by retaking
possession of the financed vehicle. In cases where the obligor objects or
raises a defense to repossession, or if otherwise required by applicable
state law, a court order must be obtained from the appropriate state court,
and the financed vehicle must then be recovered in accordance with that
order. In some jurisdictions, the secured party is required to notify the
obligor of the default and the intent to repossess the collateral and to
give the obligor a time period within which to cure the default prior to
repossession. Generally, this right to cure may only be exercised on a
limited number of occasions during the term of the related contract. Other
jurisdictions permit repossession without prior notice if it can be
accomplished without a breach of the peace (although in some states, a
course of conduct in which the creditor has accepted late payments has been
held to create a right by the obligor to receive prior notice). In many
states, after the financed vehicle has been repossessed, the obligor may
reinstate the related contract by paying the delinquent installments and
other amounts due.
NOTICE OF SALE; REDEMPTION RIGHTS
In the event of a default by the obligor, some jurisdictions require
that the obligor be notified of the default and be given a time period
within which the obligor may cure the default prior to repossession.
Generally, this right of reinstatement may be exercised on a limited number
of occasions in any one-year period.
The Uniform Commercial Code and other state laws require the secured
party to provide the obligor with reasonable notice of the date, time and
place of any public sale and/or the date after which any private sale of
the collateral may be held. In addition, some states also impose
substantive timing requirements on the sale of repossessed vehicles and/or
various substantive timing and content requirements relating to those
notices. In some states, after a financed vehicle has been repossessed, the
obligor may redeem the collateral by paying the delinquent installments and
other amounts due. The obligor has the right to redeem the collateral prior
to actual sale or entry by the secured party into a contract for sale of
the collateral by paying the secured party the unpaid principal balance of
the obligation, accrued interest thereon, reasonable expenses for
repossessing, holding and preparing the collateral for disposition and
arranging for its sale, plus, in some jurisdictions, reasonable attorneys'
fees and legal expenses. In some other states, the obligor may redeem the
collateral by payment of delinquent installments on the unpaid principal
balance of the related obligation.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the repossessed vehicles generally will be
applied first to the expenses of resale and repossession and then to the
satisfaction of the indebtedness. While some states impose prohibitions or
limitations on deficiency judgments if the net proceeds from resale do not
cover the full amount of the indebtedness, a deficiency judgment can be
sought in those states that do not prohibit or limit those judgments.
However, the deficiency judgment would be a personal judgment against the
obligor for the shortfall, and a defaulting obligor can be expected to have
very little capital or sources of income available following repossession.
Therefore, in many cases, it may not be useful to seek a deficiency
judgment or, if one is obtained, it may be settled at a significant
discount. In addition to the notice requirement, the Uniform Commercial
Code requires that every aspect of the sale or other disposition, including
the method, manner, time, place and terms, be "commercially reasonable."
Generally, courts have held that when a sale is not "commercially
reasonable," the secured party loses its right to a deficiency judgment.
The Uniform Commercial Code also permits the debtor or other
interested party to recover for any loss caused by noncompliance with the
provisions of the Uniform Commercial Code. In addition, prior to a sale,
the Uniform Commercial Code permits the debtor or other interested person
to prohibit the secured party from disposing of the collateral if it is
established that the secured party is not proceeding in accordance with the
"default" provisions under the Uniform Commercial Code.
Occasionally, after resale of a repossessed vehicle and payment of
all expenses and indebtedness, there is a surplus of funds. In that case,
the Uniform Commercial Code requires the creditor to remit the surplus to
any holder of a subordinate lien with respect to the vehicle or if no
subordinate lienholder exists, the Uniform Commercial Code requires the
creditor to remit the surplus to the obligor.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related
regulations impose substantial requirements upon lenders and servicers
involved in consumer finance. These laws include the Truth-in-Lending Act,
the Equal Credit Opportunity Act, the Federal Trade Commission Act, the
Fair Credit Billing Act, the Fair Credit Reporting Act, the Fair Debt
Collection Practices Act, the Magnuson-Moss Warranty Act, the Federal
Reserve Board's Regulations B and Z, the Soldiers' and Sailors' Civil
Relief Act of 1940, state adoptions of the National Consumer Act and of the
Uniform Consumer Credit Code, state motor vehicle retail installment sales
acts, state "lemon" laws and other similar laws. Also, state laws impose
finance charge ceilings and other restrictions on consumer transactions and
require contract disclosures in addition to those required under federal
law. These requirements impose specific statutory liabilities upon
creditors who fail to comply with their provisions. In some cases, this
liability could affect an assignee's ability to enforce consumer finance
contracts such as the contracts described above.
The so-called "Holder-in-Due-Course" Rule of the Federal Trade
Commission has the effect of subjecting any assignee of the seller in a
consumer credit transaction (and related creditors and their assignees) to
all claims and defenses which the obligor in the transaction could assert
against the seller. Liability under the FTC rule is limited to the amounts
paid by the obligor under the contract, and the holder of the contract may
also be unable to collect any balance remaining due thereunder from the
obligor. The FTC rule is generally duplicated by the Uniform Consumer
Credit Code, other state statutes or the common law in some states.
Most of the contracts will be subject to the requirements of the FTC
rule. Accordingly, each trust, as holder of the related contracts, will be
subject to any claims or defenses that the purchaser of the applicable
financed motor vehicle may assert against the seller of the financed motor
vehicle. As to each obligor, those claims are limited to a maximum
liability equal to the amounts paid by the obligor on the related contract.
The seller will represent in each sale and servicing agreement that each of
the contracts, and the sale of the related financed motor vehicle
thereunder, complied with all material requirements of applicable laws and
the regulations issued pursuant thereto.
Any shortfalls or losses arising in connection with the matters
described in the three preceding paragraphs, to the extent not covered by
amounts payable to the securityholders from amounts available under a
credit enhancement mechanism, could result in losses to securityholders.
Courts have applied general equitable principles to secured parties
pursuing repossession and litigation involving deficiency balances. These
equitable principles may have the effect of relieving an obligor from some
or all of the legal consequences of a default.
In several cases, consumers have asserted that the self-help remedies
of secured parties under the Uniform Commercial Code and related laws
violate the due process protections provided under the 14th Amendment to
the Constitution of the United States. Courts have generally upheld the
notice provisions of the Uniform Commercial Code and related laws as
reasonable or have found that the repossession and resale by the creditor
do not involve sufficient state action to afford constitutional protection
to borrowers.
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including the Bankruptcy Code and
similar state laws, may interfere with or affect the ability of a secured
party to realize upon collateral or to enforce a deficiency judgment. For
example, in a Chapter 13 proceeding under the Bankruptcy Code, a court may
prevent a creditor from repossessing a vehicle, and, as part of the
rehabilitation plan, reduce the amount of the secured indebtedness to the
market value of the vehicle at the time of bankruptcy (as determined by the
court), leaving the creditor as a general unsecured creditor for the
remainder of the indebtedness. A bankruptcy court may also reduce the
monthly payments due under a contract or change the rate of interest and
time of repayment of the indebtedness.
Under the terms of the Soldiers' and Sailors' Relief Act of 1940, an
obligor who enters the military service after the origination of the
obligor's contract (including an obligor who is a member of the National
Guard or is in reserve status at the time of the origination of the
obligor's contract and is later called to active duty) may not be charged
interest above an annual rate of 6% during the period of the obligor's
active duty status, unless a court orders otherwise upon application of the
lender. In addition, pursuant to the Military Reservist Relief Act, under
some circumstances, California residents called into active duty with the
reserves can delay payments on retail installment sales contracts,
including the contracts described above, for a period, not to exceed 180
days, beginning with the order to active duty and ending 30 days after
release. It is possible that the foregoing could have an effect on the
ability of the servicer to collect the full amount of interest owing on
some of the contracts. In addition, the acts described above impose
limitations that would impair the ability of the servicer to repossess an
affected contract during the obligor's period of active duty status. Thus,
in the event that an affected contract is in default, there may be delays
and losses occasioned by the inability to exercise the trust's rights with
respect to the related financed motor vehicle in a timely fashion.
Any shortfalls or losses arising in connection with the matters
described in the two preceding paragraphs, to the extent not covered by
amounts payable to the securityholders from amounts available under a
credit enhancement mechanism, could result in losses to securityholders.
REPURCHASE OBLIGATION
Under each sale and servicing agreement, the seller will make
representations and warranties relating to the validity, subsistence,
perfection and priority of the security interest in each related financed
motor vehicle as of the related Closing Date. See "Description of the
Transfer and Servicing Agreements - Sale and Assignment of the Contracts."
Accordingly, if any defect exists in the perfection of the security
interest in any financed motor vehicle as of the Closing Date and that
defect adversely affects the related trust's interest in the related
contract, the defect would constitute a breach of a warranty under the sale
and servicing agreement and would create an obligation of the seller to
repurchase the contract unless the breach is cured. Additionally, in the
sale and servicing agreement, the servicer will make affirmative covenants
regarding, among other things, the maintenance of the security interest of
AutoNation Financial Services in each financed motor vehicle, the breach of
which would create an obligation of the servicer to purchase any affected
contract from the related trust unless the breach is cured.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the anticipated material
federal income tax consequences of the purchase, ownership and disposition
of the notes and the certificates of any series. The summary does not
purport to deal with United States federal income tax consequences or
special rules that are applicable to holders such as dealers in securities
or foreign currency, banks, other financial institutions, insurance
companies, real estate investment trusts, regulated investment companies,
tax exempt entities, persons that hold the notes or the certificates as a
position in a "straddle," or as part of a synthetic security or "hedge",
"conversion transaction" or other integrated investment, persons that have
a "functional currency" other than the U.S. dollar and investors in
pass-through entities. Except to the extent discussed below, this
discussion is not applicable to Non-U.S. Holders (as defined below). In
addition, this summary is generally limited to investors who will hold the
notes and the certificates as "capital assets" (generally, property held
for investment) within the meaning of Section 1221 of the Code, as amended.
Prospective investors are encouraged to consult their own tax advisors in
determining the federal, state, local, foreign, alternative minimum, estate
and gift and any other tax consequences to them of the purchase, ownership
and disposition of the notes and the certificates.
The following summary is based upon current provisions of the Code,
the Treasury regulations promulgated thereunder and judicial or ruling
authority, all of which are subject to change, which change may be
retroactive. Moreover, there are no cases or IRS rulings on many of the
issues discussed below or on similar transactions involving debt
instruments and equity issued by a trust with terms similar to those of the
notes and the certificates, respectively, and no ruling on any of the
issues discussed below will be sought from the IRS. The opinions of our
counsel (described below) are not binding on the IRS or the courts. As a
result, the IRS may disagree with all or a part of the discussion below.
For purposes of the following summary, references to the trust, the notes,
the certificates and related terms, parties and documents shall be deemed
to refer, unless otherwise specified herein, to each trust and the notes,
certificates and related terms, parties and documents applicable to that
trust.
PERSONS CONSIDERING THE PURCHASE OF NOTES OR CERTIFICATES SHOULD
CONSULT THEIR OWN TAX ADVISORS CONCERNING THE APPLICATION OF THE UNITED
STATES FEDERAL TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY
CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION.
TAX CHARACTERIZATION OF EACH TRUST
Upon the sale of each series, our tax counsel will deliver an
opinion, subject to the assumptions and qualifications set forth therein,
that, although there is no specific authority regarding an entity such as
the trust, under current law, the trust on the date of the sale of the
securities will not be classified as an association (or publicly traded
partnership) taxable as a corporation for federal income tax purposes. This
opinion is based on the assumption that the terms of the owner trust
agreement and related documents will be complied with, and on counsel's
conclusions that (1) the trust does not have the characteristics necessary
for a business trust to be classified as an association taxable as a
corporation and (2) either the nature of the income of the trust will
exempt it from the rule regarding the taxation of publicly traded
partnerships as corporations or the trust will otherwise qualify for an
exemption from the rules governing publicly traded partnerships.
Opinions of counsel are not binding on the IRS. If the trust were
taxable as a corporation for federal income tax and state income and
franchise tax purposes, the trust would be subject to corporate income tax
on its taxable income. The trust's taxable income would include all its
income on the contracts, possibly reduced by its interest expense on some
or all of the classes of notes. Any corporate income tax could materially
reduce cash available to make payments on the notes and distributions on
the certificates. In addition, certificateholders could be liable for any
tax that is unpaid by the trust.
TAX CONSEQUENCES TO HOLDERS OF THE NOTES
Treatment of the Notes as Indebtedness. The parties to the indenture
have agreed, and the noteholders by their purchase of notes will be deemed
to have agreed, to treat the notes as debt for United States federal income
tax purposes. Upon the issuance of each Series, our tax counsel will
deliver an opinion, subject to the assumptions and qualifications set forth
therein, that, although there is no specific authority with respect to the
characterization for federal income tax purposes of securities having terms
similar to the notes, the notes (other than notes held by the trust, the
insurer, if any, or any of their respective affiliates) will be
characterized as debt for United States federal income tax purposes.
Possible Alternative Treatments of the Notes. If, contrary to the
opinion of our tax counsel, the IRS successfully asserted that one or more
of the notes did not represent debt for federal income tax purposes, the
notes might be treated as equity interests in the trust. If so treated, the
trust might be taxable as a corporation with the adverse consequences
described above (and the trust would not be able to reduce its taxable
income by deductions for interest expense on notes recharacterized as
equity). Alternatively, except as otherwise provide in the related
prospectus supplement, the trust might be treated as a publicly traded
partnership that would not be taxable as a corporation because it would
meet the qualifying income tests. Nonetheless, treatment of the notes as
equity interests in a publicly traded partnership could have adverse tax
consequences to some holders. For example, the interest paid to some
tax-exempt entities (including pension funds) would be subject to tax as
"unrelated business taxable income," income to foreign holders generally
would be subject to U.S. tax and U.S. tax return filing and withholding
requirements, and individual holders might be subject to limitations on
their ability to deduct their share of trust expenses. The remainder of
this discussion assumes that the notes will be treated as debt for federal
income tax purposes.
Stated Interest. Payments of "qualified stated interest" (defined
below) are includible as ordinary interest income by a holder of a debt
obligation at the time those payments are received or accrued in accordance
with the holder's regular method of tax accounting. The stated interest on
the notes will constitute qualified stated interest and, as a result, the
stated interest will be includible as ordinary income by each U.S. Holder
either at the time those payments are received or accrued depending upon
whether the U.S. Holder is a cash or accrual basis taxpayer, respectively.
Original Issue Discount. Unless a note is a Short-Term Note (as
described below), it will be treated as issued with original issue
discount, also known as OID, if the excess of the note's "stated redemption
price at maturity" over the issue price equals or exceeds a de minimis
amount equal to 1/4 of 1 percent of the note's stated redemption price at
maturity multiplied by the number of complete years (based on the
anticipated weighted average life of a note) to its maturity. A holder of a
note must include OID in gross income as ordinary interest income as it
accrues under a method taking into account an economic accrual of the
discount regardless of the holder's normal method of tax accounting. In
general, OID must be included in income in advance of the receipt of the
cash representing that income. The amount of any de minimis OID must be
included in income as principal payments are received on a note, in the
proportion that each payment bears to the original principal amount of the
note.
The issue price of a note will generally be the initial offering
price at which a substantial amount of the notes are sold for money (other
than sales to bond houses and brokers). The trust intends to treat the
issue price as including, in addition, the amount paid by the noteholder
for accrued interest, if any, that relates to a period prior to
the Closing Date. Under applicable Treasury regulations governing the
accrual of OID, the stated redemption price at maturity is the sum of all
payments on the note other than any "qualified stated interest" payments.
Qualified stated interest is generally defined as interest that is
unconditionally payable at least annually based upon a single fixed rate or
certain variable rates.
The holder of a note issued with OID must include in gross income,
for all days during its taxable year on which it holds that note, the sum
of the "daily portions" of the OID. The daily portions are computed by
allocating to each day during a taxable year a pro rata portion of the OID
that accrued during the relevant accrual period(s). In the case of an
obligation the principal on which is subject to prepayment as a result of
prepayments on the underlying collateral such as the notes, OID is computed
by taking into account the anticipated rate of prepayments assumed in
pricing the debt instrument. The Prepayment Assumption that will be used in
determining the rate of accrual of OID, premium and market discount, if
any, will be provided in the related prospectus supplement. The amount of
OID that will accrue during an accrual period (generally the period between
interest payments or compounding dates) is the excess, if any, of the sum
of (a) the present value of all payments remaining to be made on the note
as of the close of the accrual period and (b) the payments during the
accrual period of amounts included in the stated redemption price of the
note, over the "adjusted issue price" of the note as of the beginning of
the accrual period. An "accrual period" is the period over which OID
accrues, and may be of any length, provided that each accrual period is no
longer than one year and each scheduled payment of interest or principal
occurs on either the last day or the first day of an accrual period. The
trust intends to report OID on the basis of an accrual period that
corresponds to the interval between Distribution Dates. The adjusted issue
price of a note is the sum of its issue price plus prior accruals of OID,
reduced by the total payments made with respect to the note in all prior
periods, other than payments of qualified stated interest. The present
value of the remaining payments is determined on the basis of three
factors: (1) the original yield to maturity of the note (determined on the
basis of compounding at the end of each accrual period and properly
adjusted for the length of the accrual period), (2) events which have
occurred before the end of the accrual period and (3) the original
Prepayment Assumption.
The effect of this method is to increase the portions of OID required
to be included in income by a noteholder to take into account prepayments
on the contracts at a rate that exceeds the Prepayment Assumption, and to
decrease (but not below zero for any period) the portions of OID required
to be included in income by a noteholder to take into account prepayments
with respect to the contracts at a rate that is slower than the Prepayment
Assumption. Although OID will be reported to noteholders based on the
Prepayment Assumption, no representation is made to noteholders that the
contracts will be prepaid at that rate or at any other rate.
Acquisition Premium on Notes. A U.S. Holder of a note issued with OID
which acquires the note other than at original issuance for an amount that
exceeds the adjusted issue price of the note but is less than or equal to
the sum of all remaining amounts then payable under the note other than
qualified stated interest will be considered to have paid an "acquisition
premium." Under the acquisition premium rules, the amount of OID which a
U.S. Holder must include in income with respect to the note for any taxable
year will be reduced by the portion of the acquisition premium properly
allocable to that year.
Bond Premium. Generally, if a U.S. Holder acquires a note for an
amount that exceeds the sum of all remaining amounts then payable under the
note (other than qualified stated interest), the U.S. Holder may elect to
treat the excess as "amortizable bond premium."
If the bond premium is amortized, the amount of stated interest on
the note that must be included in the U.S. Holder's income for each period
ending on an interest payment date or at the maturity date, as the case may
be, will (except as Treasury regulations may otherwise provide) be reduced
by the portion of bond premium allocable to that period based on the note's
yield to maturity. If an election to amortize bond premium is not made, a
U.S. Holder will receive a tax benefit from the premium only in computing
the U.S. Holder's gain or loss upon the sale or other taxable disposition
of the note, or upon the full or partial payment of principal.
An election to amortize bond premium will apply to amortizable bond
premium on all notes and other bonds the interest on which is includible in
the U.S. Holder's gross income and that are held at, or acquired after, the
beginning of the U.S. Holder's taxable year as to which the election is
made. The election may be revoked only with the consent of the IRS. A U.S.
Holder which elects to amortize bond premium must reduce its adjusted basis
in the note by the amount of the allowable amortization.
Market Discount on Notes. If a U.S. Holder acquires a note at a
"market discount," some or all of any gain recognized by the U.S. Holder
upon a subsequent sale or other disposition of the note, or upon the full
or partial payment of principal, may be treated as ordinary income, and not
capital gain. Subject to a statutory de minimis exception, "market
discount" is the excess, if any, of (1) the stated redemption price at
maturity of a debt obligation (or in the case of a note issued with OID,
the "revised issue price") over (2) the taxpayer's adjusted tax basis in
the debt obligation immediately after its acquisition. The "revised issue
price" of a debt obligation generally equals the sum of its issue price and
the total amount of OID includible in the gross income of all holders for
periods before the acquisition of the debt obligation by the current holder
(without regard to any reduction in that income resulting from any prior
purchase at an acquisition premium) and less any cash payments (other than
qualified stated interest) already made in respect of the debt obligation.
In the case of a note acquired by a U.S. Holder at the note's
original issue, that note will not be considered to have been purchased by
the holder at a market discount if the purchase price paid for the note
equals or exceeds the note's issue price.
A U.S. Holder of a note acquired at a market discount may elect to
amortize the market discount into income, through the use of either the
straight-line inclusion method or the elective constant yield method. The
election will apply to all notes and other obligations acquired by the
electing holder at a market discount during the taxable year for which the
election is made, and all subsequent taxable years, unless the IRS consents
to a revocation of the election. If an election is made to include market
discount in income currently, the basis of the note in the hands of the
holder will be increased by the market discount thereon as it is included
in income.
Unless a U.S. Holder which acquires a note at a market discount
elects to amortize the market discount into income, any gain recognized
upon a subsequent disposition of the notes (other than in connection with
some nonrecognition transactions), or upon the full or partial payment of
principal, will be treated as ordinary income to the extent of the amount
of the market discount that would otherwise have been amortized into income
as of the disposition (utilizing the straight-line method). In addition, a
U.S. Holder may be required to defer deductions for any interest paid on
indebtedness incurred or continued to purchase or carry the note in an
amount not exceeding the deferred income, until that income is realized.
Total Accrual Election. As an alternative to separately accruing
stated interest, OID, de minimis OID, market discount, de minimis market
discount, bond premium and acquisition premium, a holder of a note (other
than a Short-Term Note, as described below) may elect to include all income
that accrues on the note using the constant yield method. If a noteholder
makes this election, income on a note will be calculated as though (1) the
issue price of the note was equal to the noteholder's adjusted basis in the
note immediately after its acquisition by the noteholder; (2) the note was
issued on the noteholder's acquisition date; and (3) none of the interest
payments on the note were "qualified stated interest." A noteholder may
make this election for a note that has premium or market discount,
respectively, only if the noteholder makes, or has previously made, an
election to amortize bond premium or to include market discount in income
currently. See "- Market Discount" and "- Amortizable Bond Premium."
Short-Term Notes. A holder of a Short Term Note may be subject to
special rules. An accrual basis holder of a Short-Term Note (and some cash
method holders as set forth in Section 1281 of the Code) generally would be
required to report interest income as interest accrues on a straight-line
basis over the term of each interest period. Other cash basis holders of a
Short-Term Note would, in general, be required to report interest income as
interest is paid (or, if earlier, upon the taxable disposition of the
Short-Term Note). However, a cash basis holder of a Short- Term Note
reporting interest income as it is paid may be required to defer a portion
of any interest expense otherwise deductible on indebtedness incurred to
purchase or carry the Short-Term Note until the taxable disposition of the
Short-Term Note. A cash basis taxpayer may elect under Section 1281 of the
Code to accrue interest income on all nongovernment debt obligations with a
term of one year or less, in which case the taxpayer would include interest
on the Short-Term Note in income as it accrues, but would not be subject to
the interest expense deferral rule referred to in the preceding sentence.
Special rules apply if a Short-Term Note is purchased for more or less than
its principal amount.
Sale or Other Disposition. If a noteholder sells a note, the holder
will recognize gain or loss in an amount equal to the difference between
the amount realized on the sale (not including accrued but unpaid interest
not previously included in income) and the holder's adjusted tax basis in
the note. The adjusted tax basis of a note to a particular noteholder will
equal the holder's cost for the note, increased by any market discount,
acquisition discount, OID and gain previously included by the noteholder in
income with respect to the note and decreased by the amount of bond
premium, if any, previously amortized and by the amount of principal
payments previously received by the noteholder with respect to the note.
Any gain or loss and any gain or loss realized upon prepayment of a note
(other than unamortized OID, whether or not accrued) will be capital gain
or loss if the note was held as a capital asset, except for gain
representing accrued interest, accrued market discount or OID not
previously included in income and will be long-term capital gain or loss if
the holder held the note for more than one year. The maximum rate of
federal income taxation on net long-term capital gain realized by a
non-corporation is 20%. Capital losses generally may be used only to offset
capital gains.
TAXATION OF NON-U.S. HOLDERS OF NOTES
Payments of interest (including OID, if any), principal and premium,
if any, on the notes to any Non-U.S. Holder will not be subject to United
States federal withholding tax, providing that, in the case of interest,
that person (1) does not own, actually or constructively, 10% or more of
the total combined voting power of all classes of the trust's or the
seller's equity that is entitled to vote, (2) is not a controlled foreign
corporation related, directly or indirectly, to the trust or the seller
through equity ownership and (3) is not a bank receiving interest described
in Section 881(c)(3)(A) of the Code, and provided that the statement
requirement described in the next sentence has been fulfilled with respect
to the beneficial owner. Sections 871(h) and 881(c) of the Code require
that, in order to obtain the exemption from withholding tax described in
the previous sentence, either the beneficial owner of the note, or a
Financial Institution and that is holding the note on behalf of the
beneficial owner, file a statement with the relevant United States
withholding agent to the effect that the beneficial owner of the note is
not a United States person. Under temporary Treasury regulations which
apply to both stated interest and sale or exchange proceeds if either is
paid with respect to a note on or before December 31, 2000, the requirement
will be fulfilled if (1) the beneficial owner of a note certifies on IRS
Form W-8, under penalties of perjury, that it is not a United States person
and provides its name and address and (2) any Financial Institution holding
the note on behalf of the beneficial owner files a statement with the
relevant United States withholding agent to the effect that it has received
the statement described above from the noteholder (and furnishes the
relevant United States withholding agent with a copy thereof). Recently
issued Final Regulations also provide that the requirement of Sections
871(h) and 881(c) generally will be fulfilled if beneficial owners
(including partners of some foreign partnerships, as well as some foreign
partnerships) meet the two conditions set forth in the preceding sentence.
A beneficial owner that is a foreign estate or trust (or fiduciary
thereof), foreign partnerships and their partners should consult their tax
advisors regarding possible additional reporting requirements.
Notwithstanding the foregoing, if interest or other income received
with respect to the note is effectively connected with a United States
trade or business conducted by a Non-U.S. Holder, the noteholder, although
exempt from the withholding tax described in the preceding paragraph, may
be subject to United States federal income tax on the interest in the same
manner as if it were a U.S. Holder. In addition, if the noteholder is a
corporation, it may be subject to a branch profits tax equal to 30% (or a
lower treaty rate) of its effectively connected earnings and profits for
the taxable year, subject to adjustments.
A Non-U.S. Holder will not be subject to United States federal income
tax on gain realized on the sale, exchange or other disposition of a note,
unless (1) the noteholder is an individual who is present in the United
States for 183 days or more in the taxable year of disposition, and either
(a) the individual has a "tax home" (as defined in Section 911(d)(3) of the
Code) in the United States (unless the gain is attributable to a fixed
place of business in a foreign country maintained by the individual and has
been subject to foreign tax of at least 10%) or (b) the gain is
attributable to an office or other fixed place of business maintained by
the individual in the United States or (2) the gain is effectively
connected with the conduct by the noteholder of a trade or business in the
United States.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The indenture trustee will be required to report annually to the IRS,
and to each noteholder of record, relevant information, including the
noteholder's name, address and taxpayer identification number (either the
noteholder's Social Security number or its employer identification number,
as the case may be), the aggregate amount of principal and interest paid
and the amount of tax withheld, if any.
In the event a U.S. Holder subject to the reporting requirements
described above fails to supply its correct taxpayer identification number
in the manner required by applicable law or underreports its tax liability,
"backup" withholding of tax equal to 31% of each payment of interest and
principal on the notes may be required. This backup withholding is not an
additional tax and may be credited against the noteholder's United States
federal income tax liability, provided that the required information is
furnished to the IRS.
Under current Treasury regulations, information reporting and backup
withholding will not apply to payments made to a noteholder that is a
Non-U.S. Holder if the certifications required by Section 871(h) and 881(c)
of the Code (described above) are received, provided that the payer does
not have actual knowledge that the payee is a United States person.
The Final Regulations modify the backup withholding and information
reporting procedures in some respects for payments made after December 31,
2000. Prospective investors are urged to consult their tax advisors
regarding the application of the backup withholding and information
reporting rules.
TAX CONSEQUENCES TO HOLDERS OF THE CERTIFICATES
The following describes the material federal income tax consequences
to the trust and the certificateholders in the event that equity interests
in the trust are held by two or more persons.
Treatment of the Trust as a Partnership. With respect to any series
of certificates held by two or more parties, the seller and the servicer
will agree, and the certificateholders will be deemed to have agreed by
their purchase of certificates, to treat the trust as a partnership for
purposes of federal and state income tax, franchise tax and any other tax
measured in whole or in part by income, with the assets of the partnership
being the assets held by the trust, the partners of the partnership being
the seller and the certificateholders, and the notes being debt of the
partnership. However, the proper characterization of the arrangement
involving the trust, the certificates, the notes, the seller and the
servicer is not clear because there is no authority on transactions closely
comparable to that contemplated herein.
A variety of alternative characterizations are possible. For example,
because the certificates generally have features characteristic of debt,
the certificates might be considered debt of the seller or the trust. Any
alternative characterization would not result in materially adverse tax
consequences to certificateholders as compared to the consequences from
treatment of the certificates as equity in a partnership, described below.
The following discussion assumes that the certificates represent equity
interests in a partnership for federal income tax purposes.
Partnership Taxation. Assuming that the trust is classified as a
partnership, the trust will not be subject to federal income tax. Rather,
each certificateholder will be required to separately take into account
such holder's allocated share of income, gains, losses, deductions and
credits of the trust. The trust's income will consist primarily of interest
and finance charges earned on the contracts (including appropriate
adjustments for market discount, OID and bond premium) and any gain upon
collection or disposition of contracts. The trust's deductions will consist
primarily of interest accruing with respect to the notes, servicing and
other fees, and losses or deductions upon collection or disposition of
contracts.
The tax items of a partnership are allocable to the partners in
accordance with the Code, Treasury regulations and the partnership
agreement (here, the owner trust agreement and related documents). The
owner trust agreement will provide, in general, that the certificateholders
will be allocated taxable income of the trust for each month equal to the
sum of (1) the interest that accrues on the certificates in accordance with
their terms for that month, including interest accruing at the applicable
interest rate for that month and interest on amounts previously due on the
certificates but not yet distributed; (2) any trust income attributable to
discount on the contracts that corresponds to any excess of the principal
amount of the certificates over their initial issue price; (3) prepayment
premium payable (if any) to the certificateholders for that month; and (4)
any other amounts of income payable to the certificateholders for that
month. The allocation described above will be reduced by any amortization
by the trust of premium on contracts that corresponds to any excess of the
issue price of certificates over their principal amount. All remaining
taxable income of the trust will be allocated to the seller. Based on the
economic arrangement of the parties, this approach for allocating trust
income should be permissible under applicable Treasury regulations,
although no assurance can be given that the IRS would not require a greater
amount of income to be allocated to certificateholders. Moreover, even
under the foregoing method of allocation, certificateholders may be
allocated income equal to the entire interest rate relating to the
certificates plus the other items described above even though the trust
might not have sufficient cash to make current cash distributions of that
amount. Thus, cash basis holders will in effect be required to report
income from the certificates on the accrual basis and certificateholders
may become liable for taxes on trust income even if they have not received
cash from the trust to pay those taxes. In addition, because tax
allocations and tax reporting will be done on a uniform basis for all
certificateholders but certificateholders may be purchasing certificates at
different times and at different prices, certificateholders may be required
to report on their tax returns taxable income that is greater or less than
the amount reported to them by the trust.
Certificateholders will be required to report items of income, loss
and deduction allocated to them by the trust in the taxable year in which
or with which the taxable year of the trust to which those allocations
relate ends. The Code prescribes rules for determining the taxable year of
the trust. It is likely that, under these rules, the taxable year of the
trust will be the calendar year. However, in the event that all of the
certificateholders possessing a 5 percent or greater interest in the equity
or the profits of the trust share a taxable year that is other than the
calendar year, the trust would be required to use that year as its taxable
year.
All of the taxable income allocated to a certificateholder that is a
pension, profit sharing or employee benefit plan or other tax-exempt entity
(including an individual retirement account) will constitute "unrelated
business taxable income" generally taxable to the holder under the Code.
Limitations on Losses and Deductions. In the event that losses or
deductions are allocated to certificateholders in the circumstances
described above, the following rules will apply. Under the "passive
activity" rules of the Code, any loss allocated to a certificateholder
which is a natural person, estate, trust, closely held "C" corporation, or
personal service corporation would be a passive activity loss while, for
purposes of those rules, income allocated to that certificateholder would
be "portfolio income." Limitations regarding the deductibility of passive
activity losses are imposed under the Code. Moreover, any losses allocated
to a certificateholder may be capital losses.
An individual taxpayer's share of expenses of the trust (including
fees to the servicer but not interest expense) would be miscellaneous
itemized deductions and thus allowable as a deduction only to the extent
that in the aggregate all of those expenses exceed two percent of the
individual taxpayer's adjusted gross income. Furthermore, some otherwise
allowable itemized deductions will be reduced, but not by more than 80%, by
an amount equal to 3% of the individual's adjusted gross income in excess
of a statutorily defined threshold. Therefore, those deductions might be
disallowed to the individual in whole or in part and might result in the
holder being taxed on an amount of income that exceeds the amount of cash
actually distributed to the holder over the life of the trust.
The trust intends to make all tax calculations relating to income and
allocations to certificateholders on an aggregate basis. If the IRS were to
require these calculations to be made separately for each contract, the
trust might be required to incur additional expense but it is believed that
there would not be a material adverse effect on certificateholders.
Discount and Premium. It is believed that the contracts were not
issued with OID, and, therefore, the trust should not have OID income.
However, the purchase price paid by the trust for the contracts may be
greater or less than the remaining principal balance of the contracts at
the time of purchase. If so, the contracts will have been acquired at a
premium or discount, as the case may be. (As indicated above, the trust
will make this calculation on an aggregate basis, but might be required to
recompute it on a contract-by-contract basis.) If the trust acquires the
contracts at a market discount or premium, the trust will elect to include
any discount in income currently as it accrues over the life of the
contracts or to offset any premium against interest income on the
contracts. As indicated above, a portion of the market discount income or
premium deduction may be allocated to certificateholders.
Section 708 Termination. Under Section 708 of the Code, the trust
will be deemed to terminate for federal income tax purposes if 50% or more
of the capital and profits interests in the trust are sold or exchanged
within a 12- month period. If a termination of the trust occurs, the trust
will be considered to contribute its assets to a new partnership in
exchange for an interest in the new partnership and immediately thereafter,
the terminated partnership will be considered to have distributed interests
in the new partnership to all of its partners (including the purchasing
partner who caused the termination) in proportion to their interests in the
terminated partnership in liquidation of the terminated partnership. The
trust will not comply with the technical requirements that might apply when
a constructive termination occurs. As a result, the trust may be subject to
tax penalties and may incur additional expenses if it is required to comply
with those requirements. Furthermore, the trust might not be able to comply
due to lack of data.
Distributions to Certificateholders. Certificateholders generally
will not recognize gain or loss with respect to distributions from the
trust. A certificateholder will, however, recognize gain to the extent any
money distributed exceeds the certificateholder's adjusted basis in the
certificates (as described below under "-Disposition of Certificates")
immediately before distribution, and a certificateholder will recognize
loss upon termination of the trust or termination of the
certificateholder's interest in the trust if the trust only distributes
money to the certificateholder and the amount distributed is less than the
certificateholder's adjusted basis in the certificates. Any resulting gain
or loss would be long-term capital gain or loss if the holding period of
the certificates were more than one year, assuming that the certificates
are held as capital assets.
Disposition of Certificates. Generally, gain or loss will be
recognized on a sale of certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the certificates
sold. A certificateholder's tax basis in a certificate will generally equal
the holder's cost increased by the holder's share of trust income
(includible in income) and decreased by any distributions received with
respect to that certificate. In addition, both the tax basis in the
certificates and the amount realized on a sale of a certificate would
include the holder's share of the notes and other liabilities of the trust.
A holder acquiring certificates at different prices may be required to
maintain a single aggregate adjusted tax basis in those certificates, and,
upon sale or other disposition of some of the certificates, allocate a
portion of the aggregate tax basis to the certificates sold (rather than
maintaining a separate tax basis in each certificate for purposes of
computing gain or loss on a sale of that certificate). Assuming the
certificates are held as capital assets, the gain or loss will be capital
gain or loss and will be long-term capital gain or loss if the certificates
are held for more than one year.
Any gain on the sale of a certificate attributable to the holder's
share of unrecognized accrued market discount on the contracts would
generally be treated as ordinary income to the holder and would give rise
to special tax reporting requirements. The trust does not expect to have
any other assets that would give rise to special reporting requirements.
Thus, to avoid those special reporting requirements, the trust will elect
to include market discount income as it accrues.
If a certificateholder is required to recognize an aggregate amount
of income (not including income attributable to disallowed itemized
deductions described above) over the life of the certificates that exceeds
the aggregate cash distributions with respect thereto, the excess will
generally give rise to a capital loss upon the retirement of the
certificates.
Allocations Between Transferors and Transferees. In general, the
trust's taxable income and losses will be determined monthly and the tax
items for a particular calendar month will be apportioned among the
certificateholders in proportion to the principal amount of certificates
owned by them as of the close of the last day of that month. As a result, a
holder purchasing certificates may be allocated tax items (which will
affect its tax liability and tax basis) attributable to periods before the
actual transaction.
The use of a monthly convention may not be permitted by existing
Treasury regulations. If a monthly convention is not allowed (or only
applies to transfers of less than all of the partner's interest), taxable
income or losses of the trust might be reallocated among the
certificateholders. The seller is authorized to revise the trust's method
of allocation between transferors and transferees to conform to a method
permitted by future Treasury regulations.
Section 754 Election. In the event that a certificateholder sells its
certificates at a profit (loss), the purchasing certificateholder will have
a higher (lower) basis in the certificates than the selling
certificateholder had. The tax basis of the trust's assets will not be
adjusted to reflect that higher (or lower) basis unless the trust were to
file an election under Section 754 of the Code. In order to avoid the
administrative complexities that would be involved in keeping accurate
accounting records, as well as potentially onerous information reporting
requirements, the trust will not make this election. As a result,
certificateholders might be allocated a greater or lesser amount of trust
income than would be appropriate based on their own purchase price for
certificates.
Administrative Matters. The owner trustee is required to keep or have
kept complete and accurate books of the trust. The books will be maintained
for financial reporting and tax purposes on an accrual basis and the fiscal
year of the trust, if not the calendar year, will be set forth in the
related prospectus supplement. The owner trustee will file a partnership
information return (IRS Form 1065) with the IRS for each taxable year of
the trust and will report each certificateholder's allocable share of items
of trust income and expense to holders and the IRS on Schedule K-1. The
trust will provide the Schedule K-1 information to nominees that fail to
provide the trust with the information statement described below and those
nominees will be required to forward the relevant information to the
beneficial owners of the certificates. Generally, holders must file tax
returns that are consistent with the information return filed by the trust
or be subject to penalties unless the holder notifies the IRS of all
inconsistencies.
Under Section 6031 of the Code, any person that holds certificates as
a nominee at any time during a calendar year is required to furnish the
trust with a statement containing relevant information on the nominee, the
beneficial owners and the certificates so held. This information includes
(1) the name, address and taxpayer identification number of the nominee and
(2) as to each beneficial owner (A) the name, address and taxpayer
identification number of that person, (B) whether that person is a United
States person, a tax-exempt entity or a foreign government, an
international organization, or any wholly-owned agency or instrumentality
of either of the foregoing and (C) relevant information on certificates
that were held, bought or sold on behalf of that person throughout the
year. In addition, brokers and financial institutions that hold
certificates through a nominee are required to furnish directly to the
trust information as to themselves and their ownership of certificates. A
clearing agency registered under Section 17A of the Exchange Act is not
required to furnish an information statement to the trust. The information
referred to above for any calendar year must be furnished to the trust on
or before the following January 31. Nominees, brokers and financial
institutions that fail to provide the trust with the information described
above may be subject to penalties.
The seller will be designated as the tax matters partner in the
related owner trust agreement and, in that capacity, will be responsible
for representing the certificateholders in any dispute with the IRS. The
Code provides for administrative examination of a partnership as if the
partnership were a separate and distinct taxpayer. Generally, the statute
of limitations for partnership items does not expire before three years
after the date on which the partnership information return is filed. Any
adverse determination following an audit of the return of the trust by the
appropriate taxing authorities could result in an adjustment of the returns
of the certificateholders, and, under some circumstances, a
certificateholder may be precluded from separately litigating a proposed
adjustment to the items of the trust. An adjustment could also result in an
audit of a certificateholder's returns and adjustments of items not related
to the income and losses of the trust. While the certificateholders may
participate in any adjudicative process that is undergone at the trust
level in arriving at this determination, the certificateholders will be
precluded from separately litigating a proposed adjustment to the items of
the trust. As the tax matters partner, the seller may enter into a binding
settlement on behalf of all certificateholders with a less than 1 percent
interest in the trust (except for any group of certificateholders with an
aggregate interest of 5 percent or more in trust profits that elects to
form a notice group or certificateholders who otherwise notify the IRS that
the seller is not authorized to settle on their behalf). In the absence of
a proceeding at the trust level, a certificateholder under some
circumstances may pursue a claim for credit or refund on its own behalf by
filing a request for administrative adjustment of a trust item. Each
certificateholder is advised to consult its own tax advisor with respect to
the impact of these procedures on its particular case.
TAXATION OF NON-U.S. HOLDERS OF CERTIFICATES
It is not clear whether the trust would be considered to be engaged
in a trade or business in the United States for purposes of federal
withholding taxes with respect to Non-U.S. Holders of certificates because
there is no clear authority dealing with that issue under facts
substantially similar to those described herein. Although it is not
expected that the trust would be engaged in a trade or business in the
United States for these purposes, the trust will withhold as if it were so
engaged in order to protect the trust from possible adverse consequences of
a failure to withhold. The trust expects to withhold on the portion of its
taxable income that is allocable to Non-U.S. Holders of certificates
pursuant to Section 1446 of the Code, as if that income were effectively
connected to a U.S. trade or business, at a rate of 35% for Non-U.S.
Holders of certificates that are taxable as corporations and 39.6% for all
other Non-U.S. Holders of certificates. The Final Regulations or subsequent
adoption of Treasury regulations or the issuance of other administrative
pronouncements may require the trust to change its withholding procedures.
In determining a holder's withholding status, the trust may rely on IRS
Form W-8, IRS Form W-9 or the holder's certification of nonforeign status
signed under penalties of perjury.
Each Non-U.S. Holder of a certificate might be required to file a
U.S. individual or corporate income tax return (including, in the case of a
corporation, the branch profits tax) on its share of the trust's income.
Each Non- U.S. Holder of a certificate must obtain a taxpayer
identification number from the IRS and submit that number to the trust on
Form W-8 in order to assure appropriate crediting of the taxes withheld. A
Non-U.S. Holder of a certificate generally would be entitled to file with
the IRS a claim for refund with respect to taxes withheld by the trust,
taking the position that no taxes were due because the trust was not
engaged in a U.S. trade or business. However, interest payments made (or
accrued) to a Non-U.S. Holder of a certificate generally will not be
considered "portfolio interest." As a result, a Non-U.S. Holder of a
certificate will be subject to United States federal income tax and
withholding tax at a rate of 30 percent, unless reduced or eliminated
pursuant to an applicable treaty. In that case, a Non-U.S. Holder of a
certificate would only be entitled to claim a refund for that portion of
the taxes in excess of the taxes that should have been withheld if the
trust is not considered to be engaged in a United States trade or business.
Backup Withholding. Distributions made on the certificates and
proceeds from the sale of the certificates will be subject to a "backup"
withholding tax of 31% if, in general, the certificateholder fails to
comply with relevant identification procedures, unless the holder is an
exempt recipient under applicable provisions of the Code.
STATE AND LOCAL TAXATION
General. Except as is set forth below, the discussion herein does not
address the taxation of each trust or the tax consequences of the purchase,
ownership or disposition of an interest in the notes under any state or
local tax law. Each investor should consult its own tax advisor regarding
state and local tax consequences.
Florida. A rule under the Florida Income Tax Code (the "Loan Rule")
provides that a "financial organization" earning or receiving interest from
loans secured by tangible property located in Florida will be deemed to be
conducting business or earning or receiving income in Florida, and will be
subject to Florida corporate income tax regardless of where the interest
was received. A financial organization is defined to include any bank,
trust company, savings bank, industrial bank, land bank, safe deposit
company, private banker, savings and loan association, credit union,
cooperative bank, small loan company, sales finance company or investment
company. The Loan Rule is not exclusive. For example, the Florida Income
Tax Code may also subject financial organizations to corporate income tax
if they earn or receive interest from loans secured by intangible property
located in Florida. If the Loan Rule were to apply to the notes, then a
financial organization investing in the notes would be subject to Florida
corporate income tax on a portion of its income at a maximum rate of 5.5%,
and would be required to file an income tax return in Florida, even if it
has no other Florida contacts. There are federal constitutional issues that
may undermine the State of Florida's ability to enforce this tax rule in
cases where the lender does not have any ties to Florida other than
ownership of the notes, however, this position has not been judicially
tested. We urge you to consult your own tax advisor as to the applicability
of the Loan Rule to an investment in the notes.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS
WITH REGARD TO THE UNITED STATES FEDERAL TAX CONSEQUENCES OF THE PURCHASE,
OWNERSHIP OR DISPOSITION OF INTERESTS IN THE NOTES OR THE CERTIFICATES, AS
WELL AS THE GIFT, ESTATE, ALTERNATIVE MINIMUM TAX CONSEQUENCES AND THE TAX
CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL, FOREIGN COUNTRY OR
OTHER TAXING JURISDICTION.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974,
as amended, which is generally referred to as "ERISA" and Section 4975 of
the Code prohibit a pension, profit-sharing or other employee benefit plan,
as well as individual retirement accounts and some types of Keogh Plans,
from engaging in transactions involving "plan assets" with persons that are
"parties in interest" under ERISA or "disqualified persons" under the Code
with respect to that benefit plan. ERISA also imposes duties on persons who
are fiduciaries of benefit plans subject to ERISA and prohibits
transactions between a benefit plan and parties in interest with respect to
those benefit plans. Under ERISA, any person who exercises any authority or
control with respect to the management or disposition of the assets of a
benefit plan is considered to be a fiduciary of that benefit plan (subject
to exceptions not here relevant). A violation of these "prohibited
transaction" rules may result in an excise tax or other penalties and
liabilities under ERISA and the Code for those persons.
Transactions involving a trust might be deemed to constitute
prohibited transactions under ERISA and the Code with respect to a benefit
plan that purchased notes or certificates if assets of the trust were
deemed to be assets of the benefit plan. Under the Plan Asset Regulation,
the assets of a trust would be treated as plan assets of a benefit plan for
the purposes of ERISA and the Code if the benefit plan acquired an "equity
interest" in the trust and none of the exceptions contained in the Plan
Assets Regulation was applicable. An equity interest is defined under the
Plan Assets Regulation as an interest other than an instrument which is
treated as indebtedness under applicable local law and which has no
substantial equity features. The likely treatment in this context of notes
and certificates of a given series will be discussed in the related
prospectus supplement.
Employee benefit plans that are governmental plans (as defined in
Section 3(32) of ERISA) and church plans (as defined in Section 3(33) of
ERISA) are not subject to ERISA requirements.
Based on the reasoning of the United States Supreme Court in John
Hancock Life Ins. Co. v. Harris Trust and Sav. Bank, 114 S. Ct. 517 (1993),
an insurance company's general account may be deemed to include assets of
the benefit plans investing in the general account (e.g., through the
purchase of an annuity contract), and the insurance company might be
treated as a "party-in-interest" with respect to a benefit plan by virtue
of the investment. Any purchaser that is an insurance company using the
assets of an insurance company general account should also note that the
Small Business Job Protection Act of 1996 added new Section 401(c) of ERISA
relating to the status of the assets of insurance company general accounts
under ERISA and Section 4975 of the Code. Pursuant to Section 401(c), the
Department of Labor was required to issue final regulations not later than
December 31, 1997 with respect to insurance policies issued on or before
December 31, 1998 that are supported by an insurer's general account. These
regulations are to provide guidance on which assets held by the insurer
constitute "plan assets" for purposes of the fiduciary responsibility
provisions of ERISA and Section 4975 of the Code. Section 401(c) also
provides that, except in the case of avoidance of these regulations and
actions brought by the Secretary of Labor relating to breaches of fiduciary
duties that also constitute breaches of state or federal criminal law,
until the date that is 18 months after these regulations become final, no
liability under the fiduciary responsibility and prohibited transaction
provisions of ERISA and Section 4975 may result on the basis of a claim
that the assets of the general account of an insurance company constitute
the plan assets of any plan.
As of the date hereof, proposed regulations have been issued by the
Department of Labor and final regulations are expected to be issued in the
near future, although the timing and nature of any final regulation is
uncertain. It should be noted that if these regulations are adopted
substantially in the form in which proposed, these regulations may not
exempt assets of insurance company general accounts from treatment as "plan
assets" after December 31, 1998. The plan asset status of insurance company
separate accounts is unaffected by new Section 401(c) of ERISA, and
separate account assets continue to be treated as the plan assets of any
plan invested in a separate account.
DUE TO THE COMPLEXITIES OF THE "PROHIBITED TRANSACTION" RULES AND THE
PENALTIES IMPOSED UPON PERSONS INVOLVED IN PROHIBITED TRANSACTIONS, IT IS
IMPORTANT THAT THE FIDUCIARY OF ANY BENEFIT PLAN CONSIDERING THE PURCHASE
OF SECURITIES CONSULT WITH ITS TAX AND LEGAL ADVISORS REGARDING WHETHER THE
ASSETS OF THE RELATED TRUST WOULD BE CONSIDERED PLAN ASSETS, THE
POSSIBILITY OF EXEMPTIVE RELIEF FROM THE PROHIBITED TRANSACTION RULES AND
OTHER ISSUES AND THEIR POTENTIAL CONSEQUENCES.
ACCEPTANCE OF SUBSCRIPTIONS ON BEHALF OF A BENEFIT PLAN IS IN NO
RESPECT A REPRESENTATION BY A TRUST OR ANY OTHER PARTY THAT THIS INVESTMENT
MEETS ALL RELEVANT LEGAL REQUIREMENTS WITH RESPECT TO INVESTMENTS BY ANY
PARTICULAR BENEFIT PLAN OR THAT THE INVESTMENT IS APPROPRIATE FOR ANY
PARTICULAR BENEFIT PLAN. EACH BENEFIT PLAN FIDUCIARY SHOULD CONSULT WITH
ITS ATTORNEYS AND FINANCIAL ADVISORS AS TO THE PROPRIETY OF AN INVESTMENT
IN LIGHT OF THE CIRCUMSTANCES OF THE PARTICULAR BENEFIT PLAN AND THE
RESTRICTIONS OF ERISA AND SECTION 4975 OF THE CODE.
UNDERWRITING
Subject to the terms and conditions set forth in one or more
underwriting agreements with respect to the securities of a series, the
seller will agree to cause the related trust to sell to the underwriter(s)
named therein and in the related prospectus supplement, and each of the
underwriters will severally agree to purchase, the principal amount of each
class of securities, as the case may be, of the related series set forth in
the related underwriting agreement and in the related prospectus
supplement.
In the underwriting agreement with respect to any given series of
securities, the applicable underwriter(s) will agree, subject to the terms
and conditions set forth therein, to purchase all the securities offered by
the related prospectus supplement if any of those securities are purchased.
Each prospectus supplement will either (1) set forth the price at which
each class of securities being offered thereby initially will be offered to
the public and any concessions that may be offered to dealers participating
in the offering of the securities or (2) specify that the related
securities are to be resold by the underwriter(s) in negotiated
transactions at varying prices to be determined at the time of sale. After
the initial public offering of any securities, the public offering prices
and concessions may be changed.
Each underwriting agreement will provide that AutoNation Financial
Services and the seller will indemnify the related underwriters against
specified civil liabilities, including liabilities under the Securities Act
of 1933, as amended, or contribute to payments the several underwriters may
be required to make in respect thereof. The place and time of delivery for
any series of securities in respect of which this prospectus is delivered
will be set forth in the accompanying prospectus supplement.
Pursuant to each underwriting agreement with respect to a given
series of securities, the closing of the sale of any class of securities
subject to the underwriting agreement will be conditioned on the closing of
the sale of all other classes of securities of that series.
LEGAL MATTERS
Relevant legal matters relating to the issuance of the securities of
any series will be passed upon for the related trust and the seller by
Weil, Gotshal & Manges LLP, New York, New York. Relevant legal matters
relating to the issuance of the securities will be passed upon for the
underwriters by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New
York. In addition, relevant matters of Florida law will be passed upon for
the related trust and the seller by Tripp Scott, P.A., Fort Lauderdale,
Florida.
REPORTS TO SECURITYHOLDERS
Unless and until securities in definitive registered form are issued,
monthly and annual reports containing information concerning the trust and
prepared by the servicer will be sent on behalf of the trust to Cede & Co.,
as nominee of DTC and the registered holder of the related global
securities, pursuant to the sale and servicing agreement. These reports
will not constitute financial statements prepared in accordance with
generally accepted accounting principles. The servicer does not intend to
send any financial reports of AutoNation Financial Services to
securityholders. The servicer will file with the SEC any periodic reports
with respect to the trust which are required under the Exchange Act and the
rules and regulations of the SEC thereunder.
WHERE YOU CAN FIND MORE INFORMATION
We filed a registration statement with the SEC relating to the
securities. This prospectus is part of the registration statement, but the
registration statement includes additional information.
The servicer will file with the SEC all required annual, monthly and
special SEC reports and other information about the trust.
You may read and copy any reports, statements or other information we
file at the SEC's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You may also request copies of these documents,
upon payment of a duplicating fee, by writing to the SEC. Please call the
SEC at (800) SEC-0330 for further information on the operation of the
public reference rooms. Our filings with the SEC are also available to the
public on the SEC's Internet site (http://www.sec.gov).
The SEC allows us to "incorporate by reference" information we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference
is considered to be part of this prospectus. Information that we file later
with the SEC will automatically update the information in this prospectus.
In all cases, you should rely on the most recently printed information
rather than contradictory information included in this prospectus or the
related prospectus supplement.
As a recipient of this prospectus, you may request a copy of any
document we incorporate by reference, except exhibits to the documents
(unless the exhibits are specifically incorporated by reference), at no
cost, by writing or calling us at (954) 769-7000.
GLOSSARY
"CERTIFICATE PRINCIPAL BALANCE" means, with respect to each class of
certificates, the stated certificate principal balance specified in the
related prospectus supplement.
"CLOSING DATE" means, with respect to any series of securities, the
date of initial issuance of that series of securities.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLECTION PERIOD" has the meaning set forth in the applicable
prospectus supplement.
"CUT-OFF DATE" has the meaning set forth in the applicable prospectus
supplement.
"DEFAULTED CONTRACT" has the meaning set forth in the applicable
prospectus supplement.
"DISTRIBUTION DATE" means, with respect to any series of securities,
the day on which a principal or interest payment is to be made on those
securities (or if that day is not a business day (i.e., a Saturday, Sunday,
a day on which the insurer, if any, is closed or a day on which banking
institutions in New York, New York or in the city in which the indenture
trustee's corporate trust office or the owner trustee's corporate trust
office is located are authorized or obligated by law to be closed), on the
next succeeding business day).
"DUE DATE" means, with respect to a motor vehicle contract, the date
upon which a payment on that motor vehicle contract is due.
"ELIGIBLE INVESTMENTS" has the meaning set forth in the applicable
prospectus supplement.
"FINAL REGULATIONS" means the final Treasury regulations which apply
to interest (including OID) and sale or exchange proceeds paid with respect
to a note after December 31, 2000.
"FINANCIAL INSTITUTION" means any securities clearing organization,
bank or other financial institution that holds customers' securities in the
ordinary course of its trade or business.
"IRS" means the Internal Revenue Service.
"LIQUIDATION EXPENSES" means the reasonable out-of-pocket expenses
(not including overhead expenses) incurred by the servicer in connection
with the collection and realization of the full amounts due under any
Defaulted Contract and the repossession and sale of any property acquired
in respect thereof which are not recoverable under any type of motor
vehicle insurance policy.
"NET INSURANCE PROCEEDS" means the proceeds paid by any insurer under
a comprehensive and collision insurance policy related to a contract (other
than funds used for the repair of the related financed vehicle or proceeds
released to the related obligor in excess of the principal balance of the
contract, and all accrued interest thereon and all other amounts due
thereunder), after reimbursement to the servicer of expenses recoverable
under that insurance policy.
"NET LIQUIDATION PROCEEDS" means, with respect to any contract that
becomes a Defaulted Contract, the amount received by the servicer in
respect of that contract during or after the Collection Period in which
that contract becomes a Defaulted Contract (excluding Liquidation Expenses
with respect to that contract).
"NON-U.S. HOLDER" means a beneficial owner of a note or certificate,
as the case may be, other than a U.S. Holder or an individual subject to
rules applicable to former citizens and residents of the United States. To
the extent provided in Treasury regulations, a trust which was in existence
on August 20, 1996 (other than a trust treated as owned by the grantor
under subpart E of part I of subchapter J of chapter 1 of the Code), and
which was treated as a United States person on August 19, 1996, may elect
to continue to be treated as a U.S. person (and, therefore, a U.S. Holder)
notwithstanding the previous sentence.
"NOTE PRINCIPAL BALANCE" means, with respect to each class of notes,
the stated note principal balance specified in the related prospectus
supplement.
"ORIGINAL POOL BALANCE" means, with respect to any trust, the
aggregate principal balance of the related contracts as of the applicable
Cut-Off Date.
"PLAN ASSET REGULATION" means the United States Department of Labor
regulation (29 CFR Section 2510.3- 101) concerning the definition of what
constitutes the assets of an employee benefit plan or an individual
retirement account subject to the Employee Retirement Income Security Act
of 1974, as amended.
"POOL BALANCE" means, with respect to any trust as of any date of
determination, the aggregate principal balance of the contracts included in
the Trust Property other than Defaulted Contracts.
"POOL FACTOR" means, with respect to any trust, a six-digit decimal
which the servicer will compute each month indicating the Pool Balance at
the end of the month as a fraction of (1) the Original Pool Balance plus
(2) the aggregate principal balance of any subsequent contracts added to
the trust as of the applicable subsequent Cut-Off Date.
"PREPAYMENT ASSUMPTION" means the method used to assume the
anticipated rate of prepayments in pricing a debt instrument.
"RECORD DATE" means, with respect to any Distribution Date or final
scheduled Distribution Date, the close of business on the business day
immediately prior to that Distribution Date or final scheduled Distribution
Date.
"SHORT-TERM NOTE" means any note that has a fixed maturity date of
not more than one year from the issue date of that note.
"SIMPLE INTEREST METHOD" means the method of calculating interest due
on a motor vehicle contract on a daily basis based on the actual principal
balance of the contract on that date.
"STRIP CERTIFICATES" means any class of certificates entitled to (1)
principal distributions with disproportionate, nominal or no interest
distributions or (2) interest distributions with disproportionate, nominal
or no principal distributions.
"STRIP NOTES" means any class of notes entitled to (1) principal
distributions with disproportionate, nominal or no interest distributions
or (2) interest distributions with disproportionate, nominal or no
principal distributions.
"TRUST ACCOUNTS" means the collection account and any other accounts
to be established with respect to a trust, including any prefunding
account, reserve fund, spread account or yield supplement account, which
accounts will be described in the related prospectus supplement.
"TRUST PROPERTY" means, to the extent specified in the related
prospectus supplement, the property of each trust, which will include:
(1) a pool of motor vehicle retail installment sales contracts, all
of which are secured by new and/or used automobiles and/or light-duty
trucks;
(2) documents relating to the contracts, including all servicing
records in hard or electronic form;
(3) collections and all other amounts due under the contracts after
the Cut-Off Date specified in the related prospectus supplement;
(4) liens on the related financed motor vehicles and the rights to
receive proceeds from claims on any related insurance policies covering the
financed motor vehicles or the related obligors;
(5) all amounts on deposit in the applicable trust accounts,
including the related collection account and any other account identified
in the applicable prospectus supplement, including all Eligible Investments
credited thereto (but excluding any investment income from Eligible
Investments which is to be paid to the servicer of the contracts or as
otherwise specified in the related prospectus supplement);
(6) the benefits of any form of credit enhancement identified in the
applicable prospectus supplement;
(7) the right of the seller to cause AutoNation Financial Services to
repurchase any contracts with respect to which it breaches any of its
representations or warranties or its servicing obligations;
(8) any other property specified in the related prospectus supplement;
and
(9) all proceeds of the foregoing. "U.S. Holder" means a beneficial
owner of a note or certificate, as the case may be, that is for United
States federal income tax purposes a citizen or resident of the United
States, a corporation, partnership or other entity created or organized in
or under the laws of the United States, or any political subdivision
thereof, an estate the income of which is subject to United States federal
income taxation regardless of its source or a trust with respect to which a
court in the United States is able to exercise primary authority over its
administration and one or more U.S. persons have the authority to control
all of its substantial decisions.
PRINCIPAL OFFICE OF
AUTONATION RECEIVABLES CORPORATION
110 South East 6th Street
Fort Lauderdale, Florida 33301
INDENTURE TRUSTEE
The Chase Manhattan Bank
450 West 33rd Street
14th Floor
New York, New York 10001
OWNER TRUSTEE
The Bank of New York (Delaware)
White Clay Center
Route 273
Newark, Delaware 19711
LEGAL ADVISOR TO THE SELLER
AS TO UNITED STATES LAW
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
LEGAL ADVISOR TO THE UNDERWRITERS
AS TO UNITED STATES LAW
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
PROSPECTUS SUPPLEMENT
ANRC AUTO OWNER TRUST 2000-A
ISSUER
$691,731,000
$167,692,000
CLASS A-1 6.72462%
ASSET-BACKED NOTES
$227,084,000
CLASS A-2 7.00%
ASSET-BACKED NOTES
$196,340,000
CLASS A-3 7.06%
ASSET-BACKED NOTES
$100,615,000
CLASS A-4 7.15%
ASSET-BACKED NOTES
AUTONATION RECEIVABLES CORPORATION
SELLER
AUTONATION FINANCIAL SERVICES CORP.
SERVICER
FIRST UNION SECURITIES, INC.
BANC OF AMERICA SECURITIES LLC
CHASE SECURITIES INC.
CREDIT SUISSE FIRST BOSTON
UNDERWRITERS
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION.
WE ARE NOT OFFERING THESE NOTES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED.
WE DO NOT CLAIM THE ACCURACY OF THE INFORMATION IN THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS AS OF ANY DATE OTHER THAN THE DATES STATED ON
THEIR RESPECTIVE COVERS.
ALL DEALERS WILL DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING
AS UNDERWRITERS OF THESE NOTES AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS
OR SUBSCRIPTIONS. IN ADDITION, ALL DEALERS SELLING THESE NOTES WILL DELIVER
A PROSPECTUS SUPPLEMENT AND PROSPECTUS UNTIL NOVEMBER 1, 2000.
